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Family involvement and new venture debt financing

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<mark>Journal publication date</mark>1/07/2011
<mark>Journal</mark>Journal of Business Venturing
Issue number4
Volume26
Number of pages17
Pages (from-to)472-488
Publication StatusPublished
<mark>Original language</mark>English

Abstract

New ventures often require debt financing but face difficulties convincing lenders of their creditworthiness because of agency problems. Researchers have shown that social capital can help small firms reduce lenders' agency concerns but new ventures do not yet have their own social capital. We propose that family involvement increases a venture's ability to borrow family social capital for the purpose of obtaining debt financing. Empirical tests with 1267 new ventures suggest that family involvement directly and indirectly improves a new venture's access to debt financing.