The Economics of Small Business Finance: The Role of Private Equity and Debt Markets in the Financial Growth Cycle

Posted: 17 Nov 2009

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Gregory F. Udell

Indiana University - Kelley School of Business - Department of Finance

Date Written: 1998

Abstract

While large firms are financed through public, visible institutions such as the stock market, private firms are financed through less visible, information scarce means – e.g., private equity or debt financing. At different points in a firm's financial growth cycle – at different stages of firm size and age – forms of financing will vary. This analysis reviews the literature on small firm finance, discusses macroeconomic and public policy implications, and identifies a research agenda. Newly available data sources on small business finance, especially for the United States, are discussed. These new tools allow empirical testing of previous theories, resulting in changes in previous thought about such issues as the role of insider vs external sources of finance. The authors note that sources of finance are interconnected and complementary.

Keywords: Credit rationing, Growth cycle, Venture capital, Firm financing, Private equity, Debt financing, Banking industry, Economic research, Datasets, Capital structure

Suggested Citation

Berger, Allen N. and Udell, Gregory F., The Economics of Small Business Finance: The Role of Private Equity and Debt Markets in the Financial Growth Cycle (1998). Journal of Banking & Finance, Vol. 22, Issue 6-8, p. 613-673 1998. Available at SSRN: https://ssrn.com/abstract=1506374

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Gregory F. Udell

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

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