Toward a Corporate Finance Theory for the Entrepreneurial Firm.

27 Pages Posted: 6 Mar 2018

See all articles by James S. Ang

James S. Ang

Florida State University; Florida State University - College of Law

Date Written: February 26, 2018


Corporate finance for the entrepreneurial firm is fundamentally different from that of the traditional firm. The standard problems and solutions to both investment and financing are reformulated in this paper. The formulation is intended to capture two distinguishing features of entrepreneurial finance: 1) Although new ventures yield negative returns on average, they are in aggregate welfare increasing for the economy, after considering their positive externalities. 2) Due to new ventures’ lack of consistent cash flows, which precludes the use of debt, the debt versus equity financing choice is replaced by the choice between the entrepreneurs’ desire for wealth versus control; taking “a larger slice of a smaller pie,” or “a smaller slice of a larger pie.”

Keywords: corporate finance, entrepreneurial firms, venture capital, capital structure

Suggested Citation

Ang, James S., Toward a Corporate Finance Theory for the Entrepreneurial Firm. (February 26, 2018). FSU College of Law, Public Law Research Paper No. 872. Available at SSRN: or

James S. Ang (Contact Author)

Florida State University ( email )

College of Business
Tallahassee, FL 32306-1042
United States
904-644-8208 (Phone)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

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