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This paper uses new panel data from the Kauffman Firm Survey to examine racial differences in the incidence and determinants of financial capital use among young firms. The author finds a heavy reliance on owner's equity at startup that declines substantially in subsequent years, whereas the reliance on outsider debt remains as high in subsequent years as at the point of startup. The author finds that black-owned businesses face persistent difficulty in accessing external capital markets. Black-owned businesses rely much more on owner equity than do white-owned businesses indicating that black-owned businesses face more difficulty in raising external capital.
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