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| Author: | Vanacker, T. Manigart, S. |
| Title: | Pecking order and debt capacity considerations for high-growth companies seeking financing |
| Journal: | Small business economics
2010 : JUL, VOL. 35:1, p. 53-69 |
| Index terms: | decision making entrepreneurship growth risk management |
| Freeterms: | pecking order theory |
| Language: | eng |
| Abstract: | In this article, incremental financing decisions made in high-growth businesses and their financial events of up to 8 years are analyzed with the use of a large longitudinal dataset. According to empirical evidence, profitable businesses rather finance investments with retained earnings, even when they have unused debt capacity, while unprofitable businesses value external equity higher. The findings are consistent with the extended pecking order theory, and it implies that new equity issues are very important for high-growth businesses looking to grow over their debt capacity. |
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