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The impact of leverage and the maturity of debt on firm growth: Evidence from West-European high-technology firms

Lage Venterink, S. (2021) The impact of leverage and the maturity of debt on firm growth: Evidence from West-European high-technology firms.

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Abstract:This study investigates the impact of capital structure, measured by leverage and debt maturity, on firm growth among an unstudied sample of West-European high-technology firms. High-tech firms have a greater need for financial capital because they rely more on investing heavily in technological innovation activities. Besides, they have unique characteristics, such as high levels of intangible assets, leading to different financing strategies. Limited research has been conducted on this relationship and scholars disagree on the role of capital structure in influencing firm growth. Therefore, this study demonstrates whether capital structure has a positive impact on firm growth as supported by the trade-off theory, agency theory and market-timing theory or has a negative impact on firm growth as supported by the agency theory and pecking-order theory. To examine this relationship, a fixed-effects panel regression is performed on a sample of 3918 unlisted Western-European high-tech firms over the period 2013-2019. The results show a positive and significant impact of leverage, in particular short-term debt, on firm growth, while the impact of long-term debt remained insignificant. These results highlight that high-tech firms in Western Europe with high leverage, with short debt maturities, grow faster than lower leveraged firms during the period examined.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/88043
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