Financial practices among high-growth entrepreneurial firms

Rapidly growing entrepreneurial firms provide the backbone for job creation and growth in the economy yet relatively little is known about them. We use the results of a survey of Entrepreneur of the Year Award winning firms in comparison with a matching set of publicly-traded mature firms to analyze the financial practices and performance of entrepreneurial firms. We find that entrepreneurial firms utilize capital more effectively to produce significantly higher rates of return on invested capital, utilize significantly more debt financing, and earn superior returns on invested equity capital. Furthermore, we observe a significant involvement on the boards of directors of entrepreneurial firms of individuals with significant equity investments and with connections to the founders of the firm.