DP3656 Debt or Equity? The Role of Venture Capital in Financing the New Economy in Germany

Author(s):	David B Audretsch, Erik Lehmann
Publication Date:	November 2002
Keyword(s):	corporate governance, entrepreneurship, New Economy, venture capital
JEL(s):	G32
Programme Areas:	Industrial Organization
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=3656

Using a dataset of the firms listed on the Neuer Markt in Germany, this Paper demonstrates that venture backed firms differ from firms with other financial resources, especially debt. Thus, the results of this study provide evidence for the hypothesis that small and innovative firms are more likely to be financed by venture capitalists instead of banks. We also provide evidence that the presence of venture capitalists enhances the growth rates of firms positively.