Growth Firms and Relationship Finance: A Capital Structure Perspective

• 成果类型: Article
• 署名作者: Inderst, Roman; Vladimirov, Vladimir
• 署名单位: Goethe University Frankfurt; University of Amsterdam
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2018.3076
• 发表日期: 2019
• 页码: 5411-5426
• 关键词: Financial contracting; relationship financing; dominant investors; Equity financing; growth firms

摘要

We analyze how relationship finance, such as venture capital and relationship lending, affects growth firms' capital structure choices. We show that relationship investors that obtain a strong bargaining position because of their privileged information about the firm optimally cash in on their dominance by pushing it to finance follow-up investments with equity. The firm underinvests if its owner refuses to accept the associated dilution. However, this problem is mitigated if the firm's initial relationship financing involves high leverage or offers initial investors preferential treatment in liquidation. By contrast, if initial investors are unlikely to gain a dominant position, firms optimally lever up only in later rounds. Our implications for relationship and venture capital financing highlight that the degree of investor dominance is of key importance for growth firms' capital structure decisions.