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Certification effect and capital structure determinants in venture-backed companies

Author

Listed:
  • Alvaro Tresierra Tanaka

    (Facultad de Económicas)

  • José Martí Pellón

    (Universidad Complutense de Madrid)

  • Marina Balboa

    (Universidad de Alicante)

Abstract

This paper analyzes changes in capital structure behavior in a sample of Spanish venture capital (VC) backed companies that may occur after a VC investment due to the certification effect provided by VC investors. Our results show significant changes in determinants such as tangibility, size and profitability. Regarding tangibility and size, the entry of an external investor eases the need to have neither tangible assets nor a large size to obtain additional debt financing. About the effect of profitability, the investments made after the initial VC investment do affect short-term profitability, but this situation is not linked to the restricted access to external debt. We find that VC investors contribute to unlisted growing companies by attracting other long-term sources of funds to continue their growth process. Este artículo analiza los cambios que pueden ocurrir en la estructura de capital de empresas que reciben capital riesgo una vez que han recibido dicha financiación, y que podrían deberse al efecto certificación que proporcionan los inversores de capital riesgo. Los resultados muestran cambios significativos en algunas de las variables determinantes de la estructura de capital, como los activos tangibles, el tamaño de la empresa, y su rentabilidad. En cuanto a las dos primeras variables, la entrada del inversor de capital riesgo relaja la necesidad tanto de poseer un volumen de activos tangibles elevado, como la de tener un tamaño empresarial grande para obtener financiación adicional a través de deuda. En cuanto a la rentabilidad, y aunque las inversiones que se realizan una vez que se ha recibido la financiación de capital riesgo tienen un efecto sobre la rentabilidad empresarial a corto plazo, no se encuentra que ello impida el acceso a financiación adicional a través de deuda. El trabajo muestra que los inversores de capital riesgo contribuyen a que las empresas no cotizadas consigan financiación de otras fuentes a largo plazo que les permita continuar con su proceso de crecimiento.

Suggested Citation

  • Alvaro Tresierra Tanaka & José Martí Pellón & Marina Balboa, 2012. "Certification effect and capital structure determinants in venture-backed companies," Working Papers. Serie EC 2012-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasec:2012-02
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    References listed on IDEAS

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    More about this item

    Keywords

    capital riesgo; estructura de capital; teoría del trade-off; valor añadido. capital structure determinants; venture capital; trade-off theory; value added.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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