Capital Market Imperfections, High-Tech Investment, and New Equity Financing

19 Pages Posted: 19 Nov 2002

See all articles by Bruce C. Petersen

Bruce C. Petersen

Washington University in St. Louis - Department of Economics

Robert E. Carpenter

University of Maryland, Baltimore County (UMBC) - Department of Economics; Federal Reserve Banks - Federal Reserve Bank of Richmond

Abstract

Highly variable returns, asymmetric information and a lack of collateral should cause small high-tech firms to have poor access to debt. New equity financing has several advantages over debt, but may be costly compared to internal finance. We examine an unbalanced panel of over 2,400 publicly traded US high-tech companies over the period 1981-98. Most small high-tech firms obtain little debt financing. New equity financing, in the form of the initial public offering, is very important and permits a major increase in firm size. After going public, comparatively few firms make heavy use of external financing.

Suggested Citation

Petersen, Bruce Clayton and Carpenter, Robert E., Capital Market Imperfections, High-Tech Investment, and New Equity Financing. The Economic Journal, Vol. 112, pp. F54-F72, 2002. Available at SSRN: https://ssrn.com/abstract=308909

Bruce Clayton Petersen

Washington University in St. Louis - Department of Economics ( email )

One Brookings Drive
St. Louis, MO 63130
United States
314-935-5643 (Phone)

Robert E. Carpenter (Contact Author)

University of Maryland, Baltimore County (UMBC) - Department of Economics ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States
410-455-6590 (Phone)
410-455-1054 (Fax)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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