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The Capital Structure Decisions of New Firms

  • Alicia M. Robb
  • David T. Robinson

This paper investigates the capital structure choices that firms make in their initial year of operation, using restricted-access data from the Kauffman Firm Survey. Contrary to many accounts of startup activity, the firms in our data rely heavily on external debt sources such as bank financing, and less extensively on friends and family-based funding sources. This fact is robust to numerous controls for credit quality, industry, and business owner characteristics. The heavy reliance on external debt underscores the importance of well functioning credit markets for the success of nascent business activity.

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File URL: http://www.nber.org/papers/w16272.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16272.

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Date of creation: Aug 2010
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Publication status: published as Alicia M. Robb & David T. Robinson, 2014. "The Capital Structure Decisions of New Firms," Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 153-179, January.
Handle: RePEc:nbr:nberwo:16272
Note: CF PR
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Manju Puri & David Robinson, 2005. "Optimism and Economic Choice," NBER Working Papers 11361, National Bureau of Economic Research, Inc.
  2. Andy Cosh & Douglas Cumming & Alan Hughes, 2009. "Outside Enterpreneurial Capital," Economic Journal, Royal Economic Society, vol. 119(540), pages 1494-1533, October.
  3. Fairlie, Robert W. & Krashinsky, Harry A., 2011. "Liquidity Constraints, Household Wealth, and Entrepreneurship Revisited," Santa Cruz Department of Economics, Working Paper Series qt6hv0m2q6, Department of Economics, UC Santa Cruz.
  4. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
  5. Michael L. Lemmon & Michael R. Roberts & Jaime F. Zender, 2008. "Back to the Beginning: Persistence and the Cross-Section of Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 63(4), pages 1575-1608, 08.
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