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Development path and capital structure of belgian biotechnology firms

Author

Listed:
  • Véronique Bastin

    () (University of Liège, Department of Management)

  • Albert Corhay

    (University of Liège
    University of Maastricht)

  • Georges Hübner

    (University of Liège
    University of Maastricht)

  • Pierre-Armand Michel

    (University of Brussels
    University of Liège)

Abstract

This study investigates the relationship between the evolution of real options values and associated financing policies for Belgian companies in the sector of bio-industries. Each firm's situation regarding the relevant types of real options is stylistically represented through a scenario tree. The consumption of a time-to-build or a growth option is respectively considered as a success or a failure in company development. Empirically, several variables enable us to locate each company along the tree at any time. The study of transitions leads us to discover that failures tend to trigger higher leverage, unlike in the trade-off theory. Yet, the increases in debt maturity, in lease and in convertible financing confirm our predictions. Overall, we emphasize evidence of undercapitalization and of proper, yet insufficient, use of hybrid financing by biotech companies.

Suggested Citation

  • Véronique Bastin & Albert Corhay & Georges Hübner & Pierre-Armand Michel, 2002. "Development path and capital structure of belgian biotechnology firms," Working Paper Research 30, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:200205-11
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    File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp30.pdf
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    References listed on IDEAS

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    Cited by:

    1. Marcel Gérard & Frédéric Verscueren, 2002. "Finance, uncertainty and investment: assessing the gains and losses of a generalized non linear structural approach using Belgian panel data," Working Paper Research 26, National Bank of Belgium.
    2. Geert Langenus, 2006. "Fiscal sustainability indicators and policy design in the face of ageing," Working Paper Research 102, National Bank of Belgium.

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