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The financing dynamics of newly founded firms

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  • Hirsch, Julia
  • Walz, Uwe

Abstract

We aim to extend the sparse knowledge on the financing dynamics of newly founded firms by investigating 2456 French manufacturing firms that were founded between 2004 and 2006. Our data comes from their legally required and reported financial statements. We observe significant heterogeneity in the financing decisions at foundation and analyze whether these differences widen or converge by using different convergence concepts. We consistently find β-convergence that indicates the initial financing decisions have a negative effect on the accumulation of this source of financing. After investigating the development of variation in financing patterns across firms over time (σ-convergence), we find mixed results. While differences in debt composition (e.g. role of trade credit, bank loans as well as relation between short and long-term debt) vanish over time the opposite is true for debt-equity mixes.

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  • Hirsch, Julia & Walz, Uwe, 2019. "The financing dynamics of newly founded firms," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 261-272.
    • Handle: RePEc:eee:jbfina:v:100:y:2019:i:c:p:261-272
    DOI: 10.1016/j.jbankfin.2018.11.009
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    Cited by:

    1. Heller, David, 2024. "Financial market integration and the effects of financing constraints on innovation," Research Policy, Elsevier, vol. 53(4).
    2. Cumming, Douglas & Deloof, Marc & Manigart, Sophie & Wright, Mike, 2019. "New directions in entrepreneurial finance," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 252-260.
    3. Honjo, Yuji, 2021. "The impact of founders’ human capital on initial capital structure: Evidence from Japan," Technovation, Elsevier, vol. 100(C).
    4. Eriko Naiki & Yuta Ogane, 2020. "Bank soundness and bank lending to new firms during the global financial crisis," Review of Financial Economics, John Wiley & Sons, vol. 38(3), pages 513-541, July.
    5. Tsuruta, Daisuke, 2023. "Bank loans, trade credit, and liquidity shortages of small businesses during the global financial crisis," International Review of Financial Analysis, Elsevier, vol. 90(C).
    6. Eric Tassel, 2023. "Crowdfunding investors, intermediaries and risky entrepreneurs," Small Business Economics, Springer, vol. 60(3), pages 1033-1050, March.
    7. González, Francisco, 2020. "Bank development, competition, and entrepreneurship: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 56(C).
    8. Berns, John P. & Shahriar, Abu Zafar M. & Unda, Luisa A., 2021. "Delegated monitoring in crowdfunded microfinance: Evidence from Kiva," Journal of Corporate Finance, Elsevier, vol. 66(C).
    9. Xu, Li & Zhang, Qin & Wang, Keying & Shi, Xunpeng, 2020. "Subsidies, loans, and companies' performance: evidence from China's photovoltaic industry," Applied Energy, Elsevier, vol. 260(C).
    10. Hirsch, Julia & Walz, Uwe, 2017. "Financial constraints, newly founded firms and the financial crisis," SAFE Working Paper Series 191, Leibniz Institute for Financial Research SAFE.

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    More about this item

    Keywords

    Financing decisions; Life-cycle; Firm growth; Newly founded firms;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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