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. © 2009 The American Finance Association.
CITATION STYLE
Brav, O. (2009). Access to capital, capital structure, and the funding of the firm. Journal of Finance, 64(1), 263–308. https://doi.org/10.1111/j.1540-6261.2008.01434.x
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