The Capital Structure of Business Start-Ups. Policy Implications
Abstract
In this article, I discuss policy implications based on a study of the capital structure of business start-ups. Using a sample of 328 newly founded enterprises in Belgian manufacturing, it turned out that venture capital is barely used as a source of financing at the time of start-up. Also, banks finance a lower fraction of debt for firms that face potentially large adverse selection and moral hazard problems. To remedy their shortage of bank credit, start-up firms use leasing and vendor financing, but have lower leverage. These results therefore suggest that newly founded enterprises may face significant financial constraints at start-up, which could contribute to their subsequent failure. As a result, I plead for policy measures that stimulate venture capital financing for smaller scale and non-high tech projects and that encourage information production by banks. While having their own merits, current government measures towards start-ups, which largely consist of providing and guaranteeing loans, do not actually meet these requirements.Download Info
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.Bibliographic Info
Article provided by Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen in its journal Review of Business and Economics.
Volume (Year): XLVIII (2003)
Issue (Month): 1 ()
Pages: 23-46
Contact details of provider:
Postal: Naamsestraat 69, 3000 Leuven
Web page: http://www.econ.kuleuven.be
More information through EDIRC
Related research
Keywords:References
No references listed on IDEASYou can help add them by filling out this form.
Citations
Lists
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.Statistics
Access and download statisticsCorrections
When requesting a correction, please mention this item's handle: RePEc:ete:revbec:20030102For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hilde Roos).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.