Capital Structure in New Technology-Based Firms: Financing in the Irish Software Sector

24 Pages Posted: 28 May 2004

See all articles by Teresa Hogan

Teresa Hogan

Dublin City University Business School

Elaine Hutson

Monash University - Dept of Banking and Finance; Financial Research Network (FIRN)

Abstract

Using a sample comprising 117 Irish software companies, we examine the capital structure of new technology-based firms. Consistent with the findings on financing for other small business, internal funds are the most important source of funding in new technology-based firms. However, contrary to the pecking order hypothesis, the use of debt is rare and equity financing dominates external sources of finance. By questioning chief executive officers via survey on their perceptions and opinions on various financing issues, we are able to conclude that in many cases software firm founders prefer outside equity to debt. The scarcity of debt in the capital structure of new technology-based firms cannot be wholly explained by financing constraints due to information asymmetries in the banking sector.

Suggested Citation

Hogan, Teresa and Hutson, Elaine, Capital Structure in New Technology-Based Firms: Financing in the Irish Software Sector. Available at SSRN: https://ssrn.com/abstract=498283 or http://dx.doi.org/10.2139/ssrn.498283

Teresa Hogan (Contact Author)

Dublin City University Business School ( email )

Dublin 9
Ireland

Elaine Hutson

Monash University - Dept of Banking and Finance ( email )

PO Box 197
Caulfield East, Victoria 3145
Australia
+61399032110 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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