Incumbent Strategic Behavior in Financial Markets and the Exit of Entrepreneurial Start-Ups

Posted: 9 Aug 2004

See all articles by Nancy Huyghebaert

Nancy Huyghebaert

KU Leuven - Department of Accountancy, Finance and Insurance

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics

Abstract

This paper empirically investigates the forces that shape the post-entry exit probability of entrepreneurial start-ups, with an emphasis on the impact of incumbents' strategic behavior in financial markets. We find that entrepreneurial start-ups in highly competitive industries are more likely to exit and that leverage compounds this exit risk. However, the latter result only holds when potential adverse selection and moral hazard problems in financial markets are large at start-up. Under these circumstances, competitors can negatively influence creditors' perceptions on entrepreneurial quality or behavior through aggressive strategic actions to impede future financing and induce the start-up's exit.

Keywords: Strategic behavior, exit, entrepreneurial firms, start-up, capital structure, predation

Suggested Citation

Huyghebaert, Nancy and Van De Gucht, Linda M., Incumbent Strategic Behavior in Financial Markets and the Exit of Entrepreneurial Start-Ups. Available at SSRN: https://ssrn.com/abstract=562821

Nancy Huyghebaert (Contact Author)

KU Leuven - Department of Accountancy, Finance and Insurance ( email )

Naamsestraat 69
B-3000 Leuven, 3000
Belgium
00 32 16326737 (Phone)
00 32 16326683 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/eng/fetew/medewerker/Userpage.aspx?PID=524

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics ( email )

Naamsestraat 69
B-3000 Leuven
BELGIUM

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
833
PlumX Metrics