Capital structure adjustment process in firms accessing venture funding

  1. Balboa Ramón, Marina 1
  2. Martí Pellón, José 2
  3. Tresierra Tanaka, Alvaro 3
  1. 1 Universitat d'Alacant
    info

    Universitat d'Alacant

    Alicante, España

    ROR https://ror.org/05t8bcz72

  2. 2 Universidad Complutense de Madrid
    info

    Universidad Complutense de Madrid

    Madrid, España

    ROR 02p0gd045

  3. 3 Universidad de Piura
    info

    Universidad de Piura

    Piura, Perú

    ROR https://ror.org/010xy3m51

Revista:
Notas técnicas: [continuación de Documentos de Trabajo FUNCAS]

ISSN: 1988-8767

Año de publicación: 2011

Número: 614

Tipo: Documento de Trabajo

Otras publicaciones en: Notas técnicas: [continuación de Documentos de Trabajo FUNCAS]

Resumen

This paper analyses the dynamic behaviour of the capital structure in a sample of Spanish venture capital (VC) backed firms and a matched sample of firms that do not receive VC. The results show that the former adjust their target debt ratio more slowly, which could be explained either by the existence of more severe financial constraints in these firms, as shown in previous literature, or by the fact that these firms could be more concerned about financing their growth than about reaching the target debt level. Additionally, differences in the factors that affect the debt ratio are found between both groups, especially regarding growth opportunities. In this way, the paper also sheds light on the factors related to the financial structure of firms that could explain why they access VC funding. Regarding the implications, it should be remarked that growing firms that are able to take advantage of growth opportunities should approach VC firms to reduce the increased distance to their target debt levels, if those firms choose to go ahead with the required investments, and/or to allow those firms not to forgo their growth prospects because their owners are not willing to accept leverage ratios beyond the target.