TY  - JOUR
TI  - The New Strategy of High-Tech Companies – Hidden Sources of Growth
T2  - Foresight and STI Governance
IS  - Foresight and STI Governance
KW  - capital structure
KW  - leverage
KW  - financial flexibility
KW  - financial constraint
KW  - zero-leverage
KW  - zero debt
KW  - high-tech firm
KW  - managerial entrenchment
AB  - The recent increase in the share of zero-leverage firms is most pronounced in the Software and Services, Hardware Equipment, and Pharmaceutical and Biotechnical industries. The reasons for these industries’ conservative debt policies are not fully disclosed. How companies in technological sectors manage to perform well attracting no debt and loosing debt tax shield benefits is a mystery. This study aims to determine why high-tech firms are less likely to have debt in the capital structure. On the basis of a sample of US-based firms from the RUSSELL 3000 index for 12 years, we show the factors leading to a zero-debt structure. After dividing the sample into high-tech and non-high-tech subsamples, we demonstrate the gap between zero-debt motives for technological and traditional sectors. We show that the common determinants of corporate structure cannot fully explain why high-tech firms choose a zero-debt policy. Testing the possible motives of debt financing avoidance, we find that high-tech firms are more financially constrained than non-high-tech firms. We further show that unconstrained high-tech firms may avoid debt to maintain their financial flexibility. On top of that, managerial entrenchment also adds to the zero-leverage choice of high-tech companies. The study results are helpful for executive management teams and investors since they shed light on the specific style of financing choice for technological firms.
AU  - Maria Kokoreva
AU  - Anastasia Stepanova
AU  - Kirill Povkh
UR  - https://foresight-journal.hse.ru/en/2023-17-1/822145749.html
PY  - 2023
SP  - 18-32
VL  - 17