The Capital Structure Decisions of New Firms

48 Pages Posted: 24 Aug 2010 Last revised: 29 Oct 2014

See all articles by Alicia Robb

Alicia Robb

University of Colorado at Boulder; Next Wave Impact; Federal Reserve Banks - Federal Reserve Bank of Atlanta

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

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Date Written: August 2010

Abstract

This paper investigates the capital structure choices that firms make in their initial year of operation, using restricted-access data from the Kauffman Firm Survey. Contrary to many accounts of startup activity, the firms in our data rely heavily on external debt sources such as bank financing, and less extensively on friends and family-based funding sources. This fact is robust to numerous controls for credit quality, industry, and business owner characteristics. The heavy reliance on external debt underscores the importance of well functioning credit markets for the success of nascent business activity.

Suggested Citation

Robb, Alicia and Robinson, David T., The Capital Structure Decisions of New Firms (August 2010). NBER Working Paper No. w16272. Available at SSRN: https://ssrn.com/abstract=1662266

Alicia Robb (Contact Author)

University of Colorado at Boulder ( email )

Leeds Business School
Boulder, CO 80309
United States

Next Wave Impact ( email )

7455 Park Lane Road
Longmount, CO 80503
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Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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