Pecking order and debt capacity considerations for high-growth companies seeking financing
- Author
- Tom Vanacker (UGent) and Sophie Manigart (UGent)
- Organization
- Abstract
- 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.
- Keywords
- Financing decisions, Pecking order theory, Debt capacity, CAPITAL STRUCTURE CHOICE, SMALL FIRMS, START-UPS, INVESTMENT, DETERMINANTS, EQUITY, PANEL, PERFORMANCE, DECISIONS, Growth, SELECTION
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Citation
Please use this url to cite or link to this publication: http://hdl.handle.net/1854/LU-1015370
- MLA
- Vanacker, Tom, and Sophie Manigart. “Pecking Order and Debt Capacity Considerations for High-Growth Companies Seeking Financing.” SMALL BUSINESS ECONOMICS, vol. 35, no. 1, 2010, pp. 53–69, doi:10.1007/s11187-008-9150-x.
- APA
- Vanacker, T., & Manigart, S. (2010). Pecking order and debt capacity considerations for high-growth companies seeking financing. SMALL BUSINESS ECONOMICS, 35(1), 53–69. https://doi.org/10.1007/s11187-008-9150-x
- Chicago author-date
- Vanacker, Tom, and Sophie Manigart. 2010. “Pecking Order and Debt Capacity Considerations for High-Growth Companies Seeking Financing.” SMALL BUSINESS ECONOMICS 35 (1): 53–69. https://doi.org/10.1007/s11187-008-9150-x.
- Chicago author-date (all authors)
- Vanacker, Tom, and Sophie Manigart. 2010. “Pecking Order and Debt Capacity Considerations for High-Growth Companies Seeking Financing.” SMALL BUSINESS ECONOMICS 35 (1): 53–69. doi:10.1007/s11187-008-9150-x.
- Vancouver
- 1.Vanacker T, Manigart S. Pecking order and debt capacity considerations for high-growth companies seeking financing. SMALL BUSINESS ECONOMICS. 2010;35(1):53–69.
- IEEE
- [1]T. Vanacker and S. Manigart, “Pecking order and debt capacity considerations for high-growth companies seeking financing,” SMALL BUSINESS ECONOMICS, vol. 35, no. 1, pp. 53–69, 2010.
@article{1015370, abstract = {{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.}}, author = {{Vanacker, Tom and Manigart, Sophie}}, issn = {{0921-898X}}, journal = {{SMALL BUSINESS ECONOMICS}}, keywords = {{Financing decisions,Pecking order theory,Debt capacity,CAPITAL STRUCTURE CHOICE,SMALL FIRMS,START-UPS,INVESTMENT,DETERMINANTS,EQUITY,PANEL,PERFORMANCE,DECISIONS,Growth,SELECTION}}, language = {{eng}}, number = {{1}}, pages = {{53--69}}, title = {{Pecking order and debt capacity considerations for high-growth companies seeking financing}}, url = {{http://doi.org/10.1007/s11187-008-9150-x}}, volume = {{35}}, year = {{2010}}, }
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