External Equity at Start-up and Post-entry Performance: Evidence from Japan


This paper investigates whether post-entry performance differs between start-up firms, according to the source of finance. In particular, the relationship between the use of external equity and performance is focused upon. Using an original data set of start-up firms in Japan, we examine the impact of start-up financing on firm growth. It is found that start-up firms financed by business angels are more likely to increase sales. On the other hand, it is not found that those financed by banks tend to grow. Also, the use of entrepreneurs’ own savings and external financing from founding members and family does not influence post-entry performance.

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