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How are small firms financed? Evidence from small business investment companies

  • Elijah Brewer, III
  • Hesna Genay
  • William E. Jackson, III
  • Paula R. Worthington
Registered author(s):

    This article examines the investment decisions of small business investment companies (SBICs). The results indicate that potential costs of contracting among SBICs, small firms, and others may have significant effects on how small firms are funded. For instance, projects generating tangible assets and firms operating in industries with few growth opportunities are more likely to be financed with debt than nondebt.

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    File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/1996/epnd96a.pdf
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    Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

    Volume (Year): (1996)
    Issue (Month): Nov ()
    Pages: 2-18

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    Handle: RePEc:fip:fedhep:y:1996:i:nov:p:2-18:n:v.20no.6
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    1. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1990. "Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 105-126 National Bureau of Economic Research, Inc.
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    3. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Bank monitoring and investment: evidence from the changing structure of Japanese corporate banking relations," Finance and Economics Discussion Series 86, Board of Governors of the Federal Reserve System (U.S.).
    4. Gompers, Paul A., 1996. "Grandstanding in the venture capital industry," Journal of Financial Economics, Elsevier, vol. 42(1), pages 133-156, September.
    5. R. Glenn Hubbard, 1990. "Asymmetric Information, Corporate Finance, and Investment," NBER Books, National Bureau of Economic Research, Inc, number glen90-1, December.
    6. João Cabral dos Santos, 1995. "Debt and equity as optimal contracts," Working Paper 9505, Federal Reserve Bank of Cleveland.
    7. Elijah Brewer, III & Hesna Genay, 1994. "Funding small businesses through the SBIC program," Economic Perspectives, Federal Reserve Bank of Chicago, issue May, pages 22-34.
    8. Christopher B. Barry, 1994. "New Directions in Research on Venture Capital Finance," Financial Management, Financial Management Association, vol. 23(3), Fall.
    9. Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
    10. Shleifer, Andrei & Vishny, Robert W, 1992. " Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, vol. 47(4), pages 1343-66, September.
    11. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
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    13. Elijah Brewer, III & Hesna Genay & William E. Jackson, III & Paula R. Worthington, 1996. "Performance and access to government guarantees: the case of small business investment companies," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 16-32.
    14. Elijah Brewer, III & Hesna Genay & William E. Jackson, III & Paula R. Worthington, 1996. "Performance and access to government guarantees: the case of small business investment companies," Proceedings 524, Federal Reserve Bank of Chicago.
    15. Gregory E. Elliehause & John D. Wolken, 1995. "Descriptive statistics from the 1987 National Survey of small business finances," Monograph, Board of Governors of the Federal Reserve System (U.S.), number 1995dsft1nsosb.
    16. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
    17. Stulz, ReneM., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, Elsevier, vol. 26(1), pages 3-27, July.
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    19. Lerner, Joshua, 1994. "Venture capitalists and the decision to go public," Journal of Financial Economics, Elsevier, vol. 35(3), pages 293-316, June.
    20. Leonard I. Nakamura, 1993. "Recent research in commercial banking: information and lending," Working Papers 93-24, Federal Reserve Bank of Philadelphia.
    21. Harris, Milton & Raviv, Artur, 1990. " Capital Structure and the Informational Role of Debt," Journal of Finance, American Finance Association, vol. 45(2), pages 321-49, June.
    22. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September.
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