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The Economics Of Startup Business Finance: An Investigation Through The Lens Of Financial Growth Cycle Theory

Author

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  • Yesubabu Konga

    (Pondicherry University)

  • Kasilingam Ramaiah

    (Pondicherry University)

Abstract

The provision of finance is the key to the survival and success of new firms. The current paper examines the startup firms’ finance acquisition through the viewpoint of financial growth cycle theory. We used chi-square and Mann-Whitney U tests to examine our hypotheses. Our study uses data from 386 Indian startup entrepreneurs over the period 2019 – 2021. Our results show that the startups access angel finance significantly in the initial years and the venture capital, banks and NBFCs in their later stage of life. Our findings argue that Indian startups partially follow the financing patterns proposed by the financial growth cycle theory.

Suggested Citation

  • Yesubabu Konga & Kasilingam Ramaiah, 2023. "The Economics Of Startup Business Finance: An Investigation Through The Lens Of Financial Growth Cycle Theory," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(2), pages 311-332, May.
    • Handle: RePEc:idn:journl:v:26:y:2023:i:2e:p:311-332
    DOI: https://doi.org/10.59091/1410-8046.2071
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    References listed on IDEAS

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    1. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    2. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
    3. Alicia M. Robb & David T. Robinson, 2014. "The Capital Structure Decisions of New Firms," The Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 153-179, January.
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    More about this item

    Keywords

    Startup finance; Financial growth cycle theory; Indian startup entrepreneurs; Startup firm stages;
    All these keywords.

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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