Entrepreneurs Shareholdings,External Shareholders and Capital Structure

Based on a database of 450 start-ups in high-tech industry,this paper investigates the capital structure of start-ups and examines the difference of micro-economic characteristics between the start-ups and the mature firms which is a key determinant of the start-ups' leverage.The results show that the short-term debts and the trade credit are the main components of the start-ups' liabilities,and the agency conflicts between the entrepreneur and the other shareholders are less serious than that in the mature firms.The level of free cash flows and the shareholding ratio of major external shareholders have no significant effects on the start-ups' leverage.However,in order to avoid the firm going bankrupt,the entrepreneur has the stronger motivation to reduce the leverage when he holds more shares,and the levels of the long-term debts and the bank loans decrease significantly with the increase of the entrepreneur's shareholdings.