Certification effect and capital structure determinants in venture-backed companies

Resumen

This paper analyzes changes in capital structure behavior in a sample of Spanish venture capital (VC) backed companies that may occur after a VC investment due to the certification effect provided by VC investors. Our results show significant changes in determinants such as tangibility, size and profitability. Regarding tangibility and size, the entry of an external investor eases the need to have neither tangible assets nor a large size to obtain additional debt financing. About the effect of profitability, the investments made after the initial VC investment do affect short-term profitability, but this situation is not linked to the restricted access to external debt. We find that VC investors contribute to unlisted growing companies by attracting other long-term sources of funds to continue their growth process.