Aa adequate "financial architecture' for new economy firms

Danny Cassimon and Peter-Jan Engelen

Global Business and Economics Review, 2001, vol. 3, issue 2, 200-211

Abstract: This paper develops a framework for devising an adequate financial architecture for the so-called "new economy" firms, suggesting that these firms need a distinct and different optimal capital structure and corporate control or corporate governance mechanisms. It is shown that an adequate financial architecture typically includes mechanisms with in-built option characteristics, such as the use of near-equity financing instruments (convertible bonds, or bonds-cum-warrants, which are all debt financing vehicles with in-built financial options) and the use of stock options. It is also shown that this financial architecture can be tailor-made to accommodate different types of new economy firms with the above-mentioned characteristics.

Keywords: new economy firms; financial architecture; financial options; debt financing; capital structure; corporate control; corporate governance; startups; SMEs. (search for similar items in EconPapers)
Date: 2001
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