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Determinants Of Capital Structure In New Ventures: Evidence From Swedish Longitudinal Data

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  • DANIEL ÖRTQVIST

    (Entrepreneurship, Luleå University of Technology, Department of Business Administration and Social Sciences, SE-971 87 Luleå, Sweden)

  • ERYADI K. MASLI

    (Swinburne University of Technology, Faculty of Business and Enterprise, Australian Graduate School of Entrepreneurship, Melbourne, Victoria, Australia 3122, Australia)

  • SHEIKH F. RAHMAN

    (Swinburne University of Technology, Faculty of Business and Enterprise, Australian Graduate School of Entrepreneurship, Melbourne, Victoria, Australia 3122, Australia)

  • CHRISTOPHER SELVARAJAH

    (Swinburne University of Technology, Faculty of Business and Enterprise, Australian Graduate School of Entrepreneurship, Melbourne, Victoria, Australia 3122, Australia)

Abstract

The early years are seen as a crucial period for the survival of ventures and yet only a limited number of studies have focused on successful new ventures when studying capital structure. Furthermore, only a few studies have included longitudinal data, tracking ventures over time, or have elaborated on the difference between short-term and long-term debt ratios when studying capital structure. In this paper, hypotheses are developed, based on capital structure theories and literature on new venture financing, and are tested on longitudinal empirical data. Results of multivariate analysis, through structural equation modeling, reveals that: (1) asset structure assists in explaining the variance in capital structure; (2) explained variance in dependent variables is decreasing for each of the four years studied; and (3) multi-group analysis reveals that the determinants influence short-term and long-term debt differently in the first four years of venture existence. Implications of this study suggest that determinants of capital structure in new ventures require theorizing of its own and demand special attention in entrepreneurial policy-making.

Suggested Citation

  • Daniel Örtqvist & Eryadi K. Masli & Sheikh F. Rahman & Christopher Selvarajah, 2006. "Determinants Of Capital Structure In New Ventures: Evidence From Swedish Longitudinal Data," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 11(04), pages 277-296.
    • Handle: RePEc:wsi:jdexxx:v:11:y:2006:i:04:n:s1084946706000477
    DOI: 10.1142/S1084946706000477
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    References listed on IDEAS

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    1. Chen, Linda H. & Lensink, Robert & Sterken, Elmer, 1999. "The determinants of capital structure: evidence from Dutch panel data," Research Report 99E14, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    2. Evaldo Guimarães Barbosa & Cristiana De Castro Moraes, 2003. "Determinants Of The Firm’S Capital Structure - The Case Of The Very Small Enterprises," Finance 0302001, University Library of Munich, Germany, revised 06 Oct 2003.
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    1. Hsiang-Lan Chen & Wen-Tsung Hsu & Yen-Sheng Huang, 2010. "Top management team characteristics, R&D investment and capital structure in the IT industry," Small Business Economics, Springer, vol. 35(3), pages 319-333, October.
    2. Sufian Radwan Al-Manaseer, 2020. "Relationship Between Capital Structure and Stock Returns of Jordanian Commercial Banks," International Business Research, Canadian Center of Science and Education, vol. 13(2), pages 100-100, February.
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    4. Gaio, Cristina & Gonçalves, Tiago & Venâncio, Ana, 2022. "Cash holdings in start-ups: The role of founder sociodemographic characteristics," Journal of Business Research, Elsevier, vol. 139(C), pages 520-528.
    5. Jason Stephen Kasozi, 2018. "Capital Structure and The Profitability of Listed Retail Firms," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 171-181.

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