This paper shows documents the fact that high growth firms maintain low debt levels. It then shows a dynamic model of financing and investment with costs of equity issuance rationalizes these findings. In the model firms keep debt at a level that lets them finance their investment purely from...

The decision on capital structure makes an impact on the overall cost of capital and consequently value of the firm. The capital structure decision of growth companies is even more important as the companies require fresh fund to finance growth. In this study, the sales of software companies in...

We study whether corporate income taxation affects the long-term growth of newly incorporated companies through its effect on their choice of leverage at entry. We find that a decrease in corporate income taxation leads to a sizeable decrease in leverage at entry, and that the distribution of...

The study provides a brief summary of the theoretical and empirical considerations related to the possible determinants of firm growth. With a special focus on small and medium-sized firms, we investigate the role of the availability of internal and external finance. After examining the key...

This paper investigates whether financial obstacles, and, more generally, financial pressure faced by firms, significantly affect firm growth. For this purpose, we use an unbalanced panel of about 1,000,000 observations for around 155,000 non-financial corporations in five euro area countries....

We calibrate a dynamic model of credit risk and analyze the relation between growth options and credit spreads. Our model features real and financing frictions, a technology with decreasing returns to scale, and endogenous investment options driven by both systematic and idiosyncratic shocks. We...

We document that firms decrease their leverage when they convert growth options into tangible assets. We argue that the act of growth option exercise decreases information asymmetry about the firm, which in turn reduces the relative cost of issuing information-sensitive securities such as...

This paper shows empirically how asset risk and financial leverage interact to explain the equity risk dynamics of value versus growth stocks. During economic downturns, the asset betas and leverage of value firms increase, contributing to a sharp rise in equity betas. Asset betas of growth...

We identify firms according to two life cycle stages, namely growth and maturity, and test the pecking order theory of financing. We find a strong maturity effect, i.e. the pecking order theory describes the financing behavior of mature firms better than growth firms. Our findings show that firm...

We analyze the relation between different forms of debt financing at the firm's start-up and subsequent firm outcomes. We distinguish between business debt, obtained in the name of the firm, and personal debt, obtained in the name of the firm's owner and used to finance the start-up firm....