The Capital Structure Decisions of New Firms
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.
Non-Technical Summaries
- The average amount of bank financing [for start-up firms] is seven times greater than the average amount of insider-financed debt....
Published Versions
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. citation courtesy of 
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