EconPapers    
Economics at your fingertips  
 

Debt signaling and outside investors in early stage firms

Mircea Epure () and Martí Guasch

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: By imposing a market like governance and directing entrepreneurs towards professional management, debt, and especially business debt, can serve as a reliable signal for outside equity investors. Such signals of firm accountability can alleviate the stringent information asymmetry at the early stages of the firm, and become stronger for bank business debt, in the presence of personal debt, and in high capital industries. Using the Kauffman Firm Survey, we find evidence consistent with our hypotheses. Outside investors can rely on the governance role of debt and its underpinnings such as the bank-firm relationship. We also corroborate that young firms tend to focus on growth rather than profitability.

Keywords: governance; entrepreneurship; financing; information asymmetry; debt; equity (search for similar items in EconPapers)
JEL-codes: G32 M13 M40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-ent and nep-sbm
Date: 2015-11, Revised 2019-02
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://econ-papers.upf.edu/papers/1546.pdf Whole Paper (application/pdf)

Related works:
Working Paper: Debt Signaling and Outside Investors in Early Stage Firms (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1546

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ().

 
Page updated 2019-10-20
Handle: RePEc:upf:upfgen:1546