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Agency costs theory and the financing life cycle empirical evidence from Swedish firm-level data

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  • Darush Yazdanfar

Abstract

The purpose of this paper is to empirically examine the financing life cycle pattern of micro-firms in Sweden from the agency costs theory perspective. The study shows that the financing structures of firms change over the firms' life cycles. Firms generally rely on internal financial sources such as equity capital and retained profits, particularly at the start-up stage. They also use short-term debt as the second most important financial source at this stage. As firms age and develop, the use of short-term debt decreases and the use of both equity capital and long-term debt simultaneously increase. The financing patterns of firms in different industries over their life cycles follow the general pattern of the total sample. The results from the statistical tests support the applicability of the financial life cycle model and the agency costs theory to explain it.

Suggested Citation

  • Darush Yazdanfar, 2012. "Agency costs theory and the financing life cycle empirical evidence from Swedish firm-level data," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 8(2), pages 226-238.
    • Handle: RePEc:ids:ijbglo:v:8:y:2012:i:2:p:226-238
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    Cited by:

    1. Mert Kiliç & Harun Demirkaya, 2016. "The Reflections of Supply Chain Management Practices on R-D," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 2, September.
    2. Yue Chen & Wentao Zhang & Xiangbin Yan & Jiahua Jin, 2020. "The life-cycle influence mechanism of the determinants of financing performance: an empirical study of a Chinese crowdfunding platform," Review of Managerial Science, Springer, vol. 14(1), pages 287-309, February.
    3. Youssef Walid, 2019. "Life Cycle Theory of the Capital Structure: Evidence from Tunisian SMEs," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(4), pages 432-449, April.

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