The Shift to the Entrepreneurial Society
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The Shift to the Entrepreneurial Society

A Built Economy in Education, Sustainability and Regulation

Edited by Jean Bonnet, Marcus Dejardin and Antonia Madrid-Guijarro

In the constant challenge economies face to grow and adapt, entrepreneurship and innovation are considered key factors. This impressive book shows the complementary and decisive role that education, access to an efficient financial system, and regulation may have in creating an entrepreneurial society.
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Chapter 11: The Use of Banking Debt by New French Firms: The Lessons of Financial Theory

Françoise Bastié, Sylvie Cieply and Pascal Cussy


Françoise Bastié, Sylvie Cieply and Pascal Cussy INTRODUCTION The financing of business start-ups is one of the most fundamental and widely discussed issues in research on entrepreneurship. In this chapter, we investigate the determinants of the use of bank debt by business startups. The first objective of this chapter is to provide some insight into the conditions under which new firms go into debt. We focus on banking loans because this financial tool is a major source of debt financing for business start-ups (Berger and Udell, 1998; Parker, 2004; Huyghebaert et al., 2007). The second objective of this chapter is to provide theoretical foundations for the empirical investigation of the determinants of debt. We indeed share Cassar’s (2004) view and deplore the fact that ‘the majority of studies that have empirically investigated start-up financing have tended to be descriptive and shied away from testable implications’ (Cassar, 2004, p. 265). The third objective of this research is to provide an empirical focus on France. Previous investigations have essentially dealt with the United States (Scheer et al., 1993; Cavalluzzo and Cavalluzzo, 1998; Levenson and Willard, 2000), the United Kingdom (Cressy, 1996; Reid, 2003), Australia (Cassar, 2004) or developing countries (Raturi and Swamy, 1999; Storey, 2004). The remainder of this chapter is divided into five sections. In the next section, a brief review of literature is provided and hypotheses are proposed. Then we describe the database and the variables. Finally, we present our findings. In particular, we show the influence of risk,...

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