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Is there a high technology pecking order? An investigation of the capital structure of NTBFs in the Irish software sector
Author(s)
Date Issued
2004-09
Date Available
2009-06-11T13:59:54Z
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
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
Businesspeople--Attitudes
Capital
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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