Abstract

BARONA-ZULUAGA, Bernardo  and  RIVERA-GODOY, Jorge Alberto. Empirical Analysis of the Financing of New Companies in Colombia. Innovar [online]. 2012, vol.22, n.43, pp.5-18. ISSN 0121-5051.

This article identifies and analyzes financing patterns for new companies in Colombia. As its frame of reference the article uses the modern financial theory that incorporates the concepts of asymmetry of information and of the institutional economy in studying the financial structure and business capital. It specifically employs the concept developed by Berger and Udell (1998) in which the lifecycle in which a particular company operates affect its optimum capital structure. The approach also tests various hypotheses about the way young Colombian companies are financed. A database supplied at the researchers' request by the Superintendence of Companies of Colombia (Superintendencia de Sociedades de Colombia), on companies founded between1999 and 2007, was used for empirical comparison of the hypothesis; the refined sample consisted of 4,034 companies, 922 founded during the last five years (children - adolescents, I&A from its Spanish acronym) and 3,112 who had been in business for more than five years (middle-age, EM from its Spanish acronym). The single variable and multivariable analyses carried out jointly indicate that a company's lifecycle influences its capital structure: not only is there a difference between the two age groups in terms of the importance of the specific financing sources, but also regarding some of the factors significantly related to its financial structure. Equity was found to be the most important financing source in both types of categories; investment by the owners is the most important equity component for the I&A, whereas retained profits are the most important for the EM. Both size and tangibility of assets are directly related to the percentage of leveraging of the companies in the two groups studied. Profitability has a significantly inverse relationship to leveraging at the EM. These findings have important implications for the management at new companies, for study and teaching of the financial discipline and for public policies.

Keywords : New companies; entrepreneurs' finances; capital structure; financing.

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