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An Empirical Investigation of the Growth Cycle Theory of Small Firm Financing

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  • Brian T. Gregory
  • Matthew W. Rutherford
  • Sharon Oswald
  • Lorraine Gardiner

Abstract

This paper empirically tests the financial growth cycle model for small and medium‐sized enterprises (SMEs), which postulates that as firms become larger, older, and more informationally transparent, their financing options become more attractive. We add to the literature by providing one of the first empirical tests of the model using a large, cross‐sectional data set. Our results partially support the financial growth cycle model. Specifically, our results show larger firms, as measured by total number of employees, are more likely to use public equity funding or long‐term debt as opposed to insider funding.

Suggested Citation

  • Brian T. Gregory & Matthew W. Rutherford & Sharon Oswald & Lorraine Gardiner, 2005. "An Empirical Investigation of the Growth Cycle Theory of Small Firm Financing," Journal of Small Business Management, Taylor & Francis Journals, vol. 43(4), pages 382-392, October.
    • Handle: RePEc:taf:ujbmxx:v:43:y:2005:i:4:p:382-392
    DOI: 10.1111/j.1540-627X.2005.00143.x
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    Cited by:

    1. Myint Moe Chit & Marian Rizov, 2024. "SMEs' diversification of financing sources: Strategy or desperation?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3123-3146, July.
    2. Artemio Jiménez-Rico & Claudia Susana Gómez-López & Johanan Zamilpa, 2023. "Determinants of Access to Bank Financing in SMEs in Mexico," JRFM, MDPI, vol. 16(11), pages 1-29, November.
    3. Sadia Noor Khan, 2024. "How bank‐specific factors affect access to financing for small and medium enterprises: Evidence from an emerging economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2095-2115, April.

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