Financing Decisions Along a Firm’s Life Cycle: Debt as a Commitment Device
We analyze the life-cycle patterns of a firm's financing decisions and their interaction with future growth and development decisions. The framework derives three diferent financing sequences (debt-debt, equity-debt, equity-equity financing) which we link to existing empirical research. Furthermore, by adopting a life-cycle approach we are able to go one step beyond existing empirical research and derive testable hypotheses with respect to diferences in the financing decisions of firms due to project, firm, market and country characteristics as well as the impact of a possible lack of start-up financing possibilities on firm dynamics.
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