The evolution of debt policies: New evidence from business startups |
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| Institution: | 1. School of Mathematics and Statistics, Xi''an Jiaotong University, 710049 Xi''an, Shaanxi, People''s Republic of China;2. Company of the 401 Research Institute of CASC, 710025 Xi''an, Shaanxi, People''s Republic of China;3. Jinhe Center for Economic Research, Xi''an Jiaotong University, 710049 Xi''an, Shaanxi, People''s Republic of China;1. National University of Ireland, Galway, Ireland;2. LUMSA University, Rome, Italy;3. Waterford Institute of Technology, Ireland |
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| Abstract: | We investigate the evolution of entrepreneurial firms’ debt policies over a period of 15 years after startup, considering leverage, debt specialization, debt maturity and debt granularity. Our analysis is based on a unique sample covering all non-financial Belgian firms founded between 1996 and 1998. We find that the debt policy of entrepreneurial firms is remarkably stable over time. The debt policy in the initial year of operation is a very important determinant of future debt policies, even after controlling for traditional contemporaneous determinants. The founder-CEO has an important impact on the stability of debt policies: the influence of initial debt policies on future debt policies is significantly reduced when the founder-CEO is replaced or when (s)he dies. Combined, our findings support imprinting theory. |
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| Keywords: | Capital structure Debt structure Entrepreneurial firms Founder-CEOs |
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