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The Capital Structure Decisions of New Firms

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  • Alicia M. Robb
  • David T. Robinson

Abstract

This paper investigates the capital structure choices that firms make in their initial year of operation, using restricted-access data from the Kauffman Firm Survey. Contrary to many accounts of startup activity, the firms in our data rely heavily on external debt sources such as bank financing, and less extensively on friends and family-based funding sources. This fact is robust to numerous controls for credit quality, industry, and business owner characteristics. The heavy reliance on external debt underscores the importance of well functioning credit markets for the success of nascent business activity.

Suggested Citation

  • Alicia M. Robb & David T. Robinson, 2010. "The Capital Structure Decisions of New Firms," NBER Working Papers 16272, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16272
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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