Development Path and Capital Structure of Belgian Biotechnology Firms

National Bank of Belgium Working Paper No. 30

56 Pages Posted: 16 Oct 2010

See all articles by Véronique Bastin

Véronique Bastin

University of Liège - Department of Financial Management

A. Corhay

University of Liège - Department of Financial Management; Maastricht University - Department of Finance

Georges Hübner

HEC Liège

Pierre-Armand Michel

University of Liege - HEC Management School

Date Written: May 1, 2002

Abstract

This study investigates the relationship between the evolution of real options values and associated financing policies for Belgian companies in the sector of bio-industries. Each firm's situation regarding the relevant types of real options is stylistically represented through a scenario tree. The consumption of a time-to-build or a growth option is respectively considered as a success or a failure in company development. Empirically, several variables enable us to locate each company along the tree at any time. The study of transitions leads us to discover that failures tend to trigger higher leverage, unlike in the trade-off theory. Yet, the increases in debt maturity, in lease and in convertible financing confirm our predictions. Overall, we emphasize evidence of undercapitalization and of proper, yet insufficient, use of hybrid financing by biotech companies.

Suggested Citation

Bastin, Véronique and Corhay, Albert H. R. F. and Hübner, Georges and Michel, Pierre-Armand, Development Path and Capital Structure of Belgian Biotechnology Firms (May 1, 2002). National Bank of Belgium Working Paper No. 30, Available at SSRN: https://ssrn.com/abstract=1691992 or http://dx.doi.org/10.2139/ssrn.1691992

Véronique Bastin (Contact Author)

University of Liège - Department of Financial Management ( email )

Liege B-4000
Belgium

Albert H. R. F. Corhay

University of Liège - Department of Financial Management ( email )

Liege B-4000
Belgium

Maastricht University - Department of Finance

Maastricht, 6200 MD
Netherlands
+31-(0)43-3883861 (Phone)
+31-(0)43-3258530 (Fax)

Georges Hübner

HEC Liège ( email )

Rue Louvrex 14, Bldg. N1
Liege, 4000
Belgium
+32 42327428 (Phone)

Pierre-Armand Michel

University of Liege - HEC Management School ( email )

B-4000 Liege
Belgium

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