CREATING VALUE ON THE BALANCE SHEET: CAPITAL STRUCTURES OF NEW BUSINESSES and Alexander Ardishvili

The popular notion that new businesses are ‘undercapitalized’ receives support from folklore, the popular press (Barren 1989) and academic sources (Cardozo et al. 1991). Undercapitalization may mean

• that total assets are ‘inadequate’ for the level of output of the business; • that the assets are financed with ‘too much’ debt and ‘too little’ equity.