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Predictors of Capital Structure in Small Ventures

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  • Rajeswararao Chaganti
  • Dona DeCarolis
  • David Deeds

Abstract

What are the key determinants of capital structure of small ventures? We empirically examined the question by analyzing capital structure decisions of 903 small ventures. Six categories of predictors were included in the analysis: goal orientation of the entrepreneur, business outlook for the enterprise, stock of human capital input, strategic changes made, gender, and life-stage of the enterprise. Goal orientation, especially satisfaction with economic need, and odds of success of the firm are among the most important predictors of equity vs. debt and Internal equity vs. external equity financing. The results suggest that entrepreneurs’ personal characteristics play a key role in capital structure decisions.

Suggested Citation

  • Rajeswararao Chaganti & Dona DeCarolis & David Deeds, 1996. "Predictors of Capital Structure in Small Ventures," Entrepreneurship Theory and Practice, , vol. 20(2), pages 7-18, January.
    • Handle: RePEc:sae:entthe:v:20:y:1996:i:2:p:7-18
    DOI: 10.1177/104225879602000202
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    References listed on IDEAS

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    2. Hadar Gafni & Dan Marom & Alicia Robb & Orly Sade, 0. "Gender Dynamics in Crowdfunding (Kickstarter): Evidence on Entrepreneurs, Backers, and Taste-Based Discrimination," Review of Finance, European Finance Association, vol. 25(2), pages 235-274.
    3. Bede Akorige Atarah & Augustine Awuah Peprah & Abednego F. Okoe Amartey & Bylon Abeeku Bamfo, 2021. "Making do by doing without: bricolage in the funding sources of female entrepreneurs in resource-constrained environments," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 11(1), pages 361-378, December.
    4. Susan Coleman & Alicia Robb, 2009. "A comparison of new firm financing by gender: evidence from the Kauffman Firm Survey data," Small Business Economics, Springer, vol. 33(4), pages 397-411, December.
    5. Honjo, Yuji & Kwak, Charee & Uchida, Hirofumi, 2022. "Initial funding and founders’ human capital: An empirical analysis using multiple surveys for start-up firms," Japan and the World Economy, Elsevier, vol. 63(C).
    6. Basha, Shabeen Afsar & Bennasr, Hamdi & Goaied, Mohamed, 2025. "Culture, financial literacy, and leverage of small firms," Research in International Business and Finance, Elsevier, vol. 75(C).
    7. Chamu Sundaramurthy & Glen E. Kreiner, 2008. "Governing by Managing Identity Boundaries: The Case of Family Businesses," Entrepreneurship Theory and Practice, , vol. 32(3), pages 415-436, May.
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