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Access to Capital, Capital Structure, and the Funding of the Firm

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  • OMER BRAV
Abstract
Based upon a large data set of public and private firms in the United Kingdom, I find that compared to their public counterparts, private firms rely almost exclusively on debt financing, have higher leverage ratios, and tend to avoid external capital markets, leading to a greater sensitivity of their capital structures to fluctuations in performance. I argue that these differences are due to private equity being more costly than public equity. I further examine the private firms subsample to show that private equity is more costly than its public counterpart due to information asymmetry and the desire to maintain control.

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  • Omer Brav, 2009. "Access to Capital, Capital Structure, and the Funding of the Firm," Journal of Finance, American Finance Association, vol. 64(1), pages 263-308, February.
    • Handle: RePEc:bla:jfinan:v:64:y:2009:i:1:p:263-308
    DOI: 10.1111/j.1540-6261.2008.01434.x
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