Is there a high technology pecking order? An investigation of the capital structure of NTBFs in the Irish software sector

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Title: Is there a high technology pecking order? An investigation of the capital structure of NTBFs in the Irish software sector
Authors: Hogan, Teresa
Hutson, Elaine
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Date: Sep-2004
Abstract: This paper examines the financing of 117 privately held new technology-based firms (NTBFs) in the Irish software product sector. We advance the high-technology pecking order hypothesis (HTPOH) to explain the dominance of external equity over debt in NTBFs. Using founders’ opinions and perceptions on various financing issues, we find evidence consistent with four implications of the HTPOH. Sample firm founders perceive low tax benefits of debt, and very high levels of business risk as reflected in pessimism about their likelihood of survival even with adequate financing. In addition, founders perceive greater information asymmetries in debt than in private equity markets. This finding is consistent with the spirit of Myers’ (1984) and Myers and Majluf’s (1984) pecking order hypothesis in that firms prefer sources of finance associated with the least information asymmetry. A related finding is that founders believe issuing equity sends a positive signal to clients, suppliers and financiers.
Type of material: Working Paper
Publisher: University College Dublin. School of Business. Centre for Financial Markets
Series/Report no.: Centre for Financial Markets working paper series; WP-06-07
Copyright (published version): 2004, Centre for Financial Markets
Subject LCSH: Computer software industry--Ireland
High technology industries--Finance
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Language: en
Status of Item: Not peer reviewed
Appears in Collections:Centre for Financial Markets Working Papers

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