Equity-based Financial Slack and New Venture Performance: Evidence from matched single-founder ventures

Horatio M. Morgan

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines whether equity-based financial slack in the form of relatively high levels of founding equity will systematically hurt new venture performance. Drawing on data on 445 single-founder new ventures over the period 2004-2007, it uses the propensity score matching method to estimate the average effect of equity-based financial slack on new venture performance. It finds a negative and statistically significant average effect. This implies that single-founder new ventures that started out with relatively high levels of founding equity subsequently had a relatively low rate of profitability on average. The underlying mechanisms behind this empirical finding are explored, and the implications for the development of existing theory and practice are discussed.

Keywords: Financial slack; Founding equity; New venture; Propensity score matching. (search for similar items in EconPapers)
JEL-codes: G32 L26 M13 (search for similar items in EconPapers)
Date: 2013-09-28
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/50291/1/MPRA_paper_50291.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:50291

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().