The Capital Structure of Business Start-Ups. Policy Implications
In this article, I discuss policy implications based on a study of the capital structure of business start-ups. Using a sample of 328 newly founded enterprises in Belgian manufacturing, it turned out that venture capital is barely used as a source of financing at the time of start-up. Also, banks finance a lower fraction of debt for firms that face potentially large adverse selection and moral hazard problems. To remedy their shortage of bank credit, start-up firms use leasing and vendor financing, but have lower leverage. These results therefore suggest that newly founded enterprises may face significant financial constraints at start-up, which could contribute to their subsequent failure. As a result, I plead for policy measures that stimulate venture capital financing for smaller scale and non-high tech projects and that encourage information production by banks. While having their own merits, current government measures towards start-ups, which largely consist of providing and guaranteeing loans, do not actually meet these requirements.
Volume (Year): XLVIII (2003)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: Naamsestraat 69, 3000 Leuven|
Web page: http://www.econ.kuleuven.be
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ete:revbec:20030102. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hilde Roos)The email address of this maintainer does not seem to be valid anymore. Please ask Hilde Roos to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.