The paper investigates young firms' choice of capital source. Our theoretical model hypothesizes a positive (negative) relation between riskiness of the project (price of venture capital) and receiving informed equity. We test our predictions by employing a unique data set collected by KfW...

Financial theory creates a puzzle. Some authors argue that high-risk entrepreneurs choose debt contracts instead of equity contracts since risky but high returns are of relatively more value for a loan-financed firm. On the contrary, authors who focus explicitly on start-up finance predict that...

Successful newly established companies are a significant factor for the prosperous development of a national economy. Young innovative companies play a key role in the quick market launch and distribution of new technologies and products. As founders only rarely have sufficient own funds,...

Financial theory creates a puzzle. Some authors argue that high-risk entrepreneurs choose debt contracts instead of equity contracts since risky but high returns are of relatively more value for a loan-financed firm. Conversely, authors who focus explicitly on start-up finance predict that...

Financial theory creates a puzzle. Some authors argue that high-risk entrepreneurs choose debt contracts instead of equity contracts since risky but high returns are of relatively more value for a loan-financed firm. Conversely, authors who focus explicitly on start-up finance predict that...

Financial theory creates a puzzle. Some authors argue that high-risk entrepreneurs choose debt contracts instead of equity contracts since risky but high returns are of relatively more value for a loan-financed firm. On the contrary, authors who focus explicitly on start-up finance predict that...