Can Equity Issuance Costs Explain the Low Leverage of High Growth Firms?

32 Pages Posted: 15 Dec 2011

Date Written: July 1, 2011

Abstract

This paper shows documents the fact that high growth firms maintain low debt levels. It then shows a dynamic model of financing and investment with costs of equity issuance rationalizes these findings. In the model firms keep debt at a level that lets them finance their investment purely from retained earnings.

Keywords: High Growth Firms, Corporate Finance, Investment, Trade-Off Model, Financing Frictions

JEL Classification: E22, G31, G32

Suggested Citation

Bazdresch, Santiago, Can Equity Issuance Costs Explain the Low Leverage of High Growth Firms? (July 1, 2011). Available at SSRN: https://ssrn.com/abstract=1971892 or http://dx.doi.org/10.2139/ssrn.1971892

Santiago Bazdresch (Contact Author)

Banco de México

Av. 5 de Mayo No. 18
Col. Centro, Deleg. Cuauhtémoc
Ciudad de México, DF, CDMX 06059
Mexico
+525552372000 (Phone)

HOME PAGE: http://www.banxico.org.mx/

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