Outside Entrepreneurial Capital
39 Pages Posted: 8 Feb 2005 Last revised: 10 Sep 2008
Date Written: August 17, 2007
This paper investigates factors that affect rejection rates in applications for outside finance among different types of investors (banks, venture capital funds, leasing firms, factoring firms, trade customers and suppliers, partners and working shareholders, private individuals and other sources), taking into account the non-randomness in a firm's decision to seek outside finance. The data support the traditional pecking order theory. Further, the data indicate that firms seeking capital are typically able to secure their requisite financing from at least one of the different available sources. However, external finance is often not available in the form that a firm would like.
Keywords: Entrepreneurial Finance, Capital Gaps, Pecking Order, Adverse Selection
JEL Classification: G21, G22, G23, G24, G31, G32, G35
Suggested Citation: Suggested Citation