Does Venture Capital affect capital structure rebalancing? The case of small knowledge-intensive service firms

Filipe Sardo, Zélia Serrasqueiro and Elisabete Félix

Structural Change and Economic Dynamics, 2020, vol. 53, issue C, 170-179

Abstract: This study analyses small knowledge-intensive service (SKIS) firms’ capital structure rebalancing, before and after Venture Capital (VC) entry. We use data for a sample of 1161 Western European SKIS firms, for the period 2006–2015. Two sub-samples were created: one composed of firms before VC entry; the other composed of SKIS firms after VC treatment. We use panel data models and the system GMM (1998) dynamic estimator. The results obtained suggest that after VC entry, SKIS firms are close to the predictions of the pecking order theory. Therefore, SKIS firms after VC participation on firm equity, probably become less dependent on debt, choosing internal finance to fund assets that are firm-specific or have an intangible nature, and, hence cannot be pledged as collaterals.

Keywords: Capital structure rebalancing; Small knowledge-intensive service firms; Venture Capital; Europe (search for similar items in EconPapers)
JEL-codes: G32 G33 L26 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:53:y:2020:i:c:p:170-179

DOI: 10.1016/j.strueco.2020.02.003

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