Pecking order and debt capacity considerations for high-growth companies seeking financing

被引:0
作者
Tom R. Vanacker
Sophie Manigart
机构
[1] Ghent University,
[2] Ghent University and Vlerick Leuven Gent Management School,undefined
来源
Small Business Economics | 2010年 / 35卷
关键词
Financing decisions; Pecking order theory; Debt capacity; Growth; G32; L26;
D O I
暂无
中图分类号
学科分类号
摘要
This paper examines incremental financing decisions within high-growth businesses. A large longitudinal dataset, free of survivorship bias, to cover financing events of high-growth businesses for up to 8 years is analyzed. The empirical evidence shows that profitable businesses prefer to finance investments with retained earnings, even if they have unused debt capacity. External equity is particularly important for unprofitable businesses with high debt levels, limited cash flows, high risk of failure or significant investments in intangible assets. These findings are consistent with the extended pecking order theory controlling for constraints imposed by debt capacity. It suggests that new equity issues are particularly important to allow high-growth businesses to grow beyond their debt capacity.
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页码:53 / 69
页数:16
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