The financing dynamics of newly founded firms

Abstract

Little evidence exists on the financing decisions of newly founded firms or on the financing dynamics of these firms over their life cycle. We aim to help filling this gap by investigating the financing dynamics of 2,456 French manufacturing firms founded between 2004 and 2006 through their legally required and reported financial statements. Because we observe significant heterogeneity in the financing decision in the firms' founding year, we focus on analyzing whether these differences widen, persist, or converge by using different convergence concepts. We identify a persistence-cum-convergence pattern. We find the existence of β-convergence (implying that e.g. firms with lower initial levels of debt accumulate more debt over time) but not of σ− convergence (i.e. we observe an increase in the cross-sectional dispersion of the financing structure). We also show that the dynamics of financing matter for the growth path of the firms.

Working capital policy of newly incorporated firms

“…This can be explained as companies devise their initial WCP based on set of assumptions, forecasts and perceived industry scenarios, which later on change in response to environmental fluctuations as well as experience of the firm (Mittal and Garg, 2022). Findings are congruent with past results of Hirsch and Walz (2019) and Khan et al (2022), and also confirm the hypothesis. However, though results conclude convergence of initial difference in working capital ratios; firms continue to follow their legacy of inception as the difference between the mean ratios of respective groups does not eliminate.…”

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

“…Following the merger literature, we control for firm characteristics and deal variables that have power in explaining acquirer abnormal returns. Therefore, we include in equation (4) the age of the acquirer to control for information asymmetry (Barbopoulos et al , 2012; Moeller et al , 2007), the return on assets to control for acquirer profitability (Andriosopoulos and Yang, 2015; Benson et al , 2015; Louis, 2005; Yen and André, 2019), the ratio of total debt to total assets to control for acquirer leverage (Ge et al , 2020; Hirsch and Walz, 2019; Zhang and Mauck, 2018), the beta coefficient to control for acquirer risk (Bozos et al , 2013; Brealey et al , 2019), the current ratio (ratio of current assets to current liabilities) to control for acquirer liquidity (Hu et al , 2020), the ratio of fixed assets to common equity to control for tangibility (Ang et al , 2019; Hu et al , 2020) and Tobin’s q ratio to control for acquirer’s growth opportunities (Dong et al , 2006; Elnahas and Kim, 2017; Servaes, 1991). Furthermore, we include in equation (4) variables related to the merger deal, which are the deal value (Alexandridis et al , 2013) and the relative deal size (Alexandridis et al , 2017; Humphery-Jenner and Powell, 2014; Moeller et al , 2004).…”

El financiamiento como estrategia de desarrollo en microempresas artesanales de San Bartolo Coyotepec, Oaxaca, México

“…Se parte, por un lado, de las altas disposiciones que manejan las instituciones bancarias y, por otro, de las limitaciones que tienen las organizaciones para cumplir con las demandas (Hirsch y Walz, 2019).…”

“…Los empresarios, al conocer las condiciones del establecimiento, determinan las decisiones y la persistencia en las dinámicas de financiamiento. vida de la empresa (Hirsch y Walz, 2019). Existen fallas detectadas en el funcionamiento de los mercados financieros característica de las economías modernas, asociadas a la dificultad de información (de las transacciones financieras), factores como los ahorros fiscales generados por los intereses, las altas garantías y complejas normativas de contratos, etc., o bien la imposibilidad de los dueños de negocios de utilizarlas por desconfianza a las instituciones que las otorgan, porque no son sujetos de crédito por falta de historial crediticio, falta de solvencia económica y garantías suficientes (Bustos y Pugliese, 2015).…”