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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)

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    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.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Journal of Developmental Entrepreneurship.

    Volume (Year): 11 (2006)
    Issue (Month): 04 ()
    Pages: 277-296

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    Handle: RePEc:wsi:jdexxx:v:11:y:2006:i:04:p:277-296

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    Related research

    Keywords: Capital structure; new ventures; entrepreneurship; financing; longitudinal study;

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    Cited by:
    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. Jun Du & Alessandra Guariglia & Alexander Newman, . "Does social capital affect the financing decisions of Chinese small and medium-sized enterprises?," Discussion Papers 10/13, University of Nottingham, GEP.

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