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The Determinants of Financial Structure: New Insights from Business Start-ups

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Listed author(s):
  • Nancy Huyghebaert
  • Linda M. Van de Gucht
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    Abstract

    "Business start-ups lack prior history and reputation, face high failure risk, and have highly concentrated ownership. The resulting information and incentive problems, combined with entrepreneurial private benefits of control, affect initial financing decisions. This paper examines simultaneously the impact of these issues on leverage, debt mix and maturity. We find that start-ups with high adverse selection and risk shifting problems contract less bank debt but compensate with other debt sources. Start-ups in growing industries have lower leverage, but raise more bank debt. Entrepreneurs with large private control benefits contract less but longer term bank loans to lower the default probability." Copyright 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-036X.2006.00287.x
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    Article provided by European Financial Management Association in its journal European Financial Management.

    Volume (Year): 13 (2007)
    Issue (Month): 1 ()
    Pages: 101-133

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    Handle: RePEc:bla:eufman:v:13:y:2007:i:1:p:101-133
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    Cited by:

    1. Astrid K. Chludek, 2011. "A note on the price of trade credit," Managerial Finance, Emerald Group Publishing, vol. 37(6), pages 565-574, May.
    2. Julia Korosteleva & Tomasz Mickiewicz, 2011. "Start-Up Financing in the Age of Globalization," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(3), pages 23-49, May.
    3. Alessandro Fedele & Andrea Mantovani, 2010. "The Importance of Being Consulted," Annals of Economics and Finance, Society for AEF, vol. 11(2), pages 231-245, November.
    4. Denis Frydrych & Tony Kinder, 2015. "How New Is Crowdfunding? The Venture Capital Evolution without Revolution – Discourse on Risk Capital Themes and their Relevance to Poland (Jak nowe jest zjawisko finansowana spolecznosciowego? Ewoluc," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 13(56), pages 177-194.
    5. Mac an Bhaird, Ciarán & Lucey, Brian, 2010. "An empirical investigation of the financial growth life cycle," MPRA Paper 61948, University Library of Munich, Germany.
    6. Keasey, Kevin & Martinez, Beatriz & Pindado, Julio, 2015. "Young family firms: Financing decisions and the willingness to dilute control," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 47-63.
    7. Tobias Stucki, 2009. "How long do external capital constraints matter?," KOF Working papers 09-241, KOF Swiss Economic Institute, ETH Zurich.
    8. Kazuo Ogawa & Elmer Sterken & Ichiro Tokutsu, 2013. "The trade credit channel revisited: evidence from micro data of Japanese small firms," Small Business Economics, Springer, vol. 40(1), pages 101-118, January.
    9. Maksim Belitski & Julia Korosteleva & Julia Korosteleva, 2012. "Entrepreneurial Dynamics and Higher Education Institutions: Evidence from the Post-Communist World," UCL SSEES Economics and Business working paper series 120, UCL School of Slavonic and East European Studies (SSEES).

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