The Determinants of Equity Lines Financing: An International Study

Abstract

Equity lines financing allows companies to increase their capital by issuing shares in successive tranches, as and when required over an agreed period of time, in order to boost equity and cash flow. The purpose of this article is to examine the factors which inform the use of this method, considering the specific parameters of businesses using equity lines, as well as variables linked to the institutional and economic context. Employing a model based on the Generalized Method of Moments (GMM) technique, we studied 407 firms in 15 countries making using of equity lines Financing in the period 2004-2018. The results confirm that the existence of opportunities for growth, the existence of a well-developed secondary market (maturity, expertise in financial intermediation activities, volume of transactions etc.) and the broader economic outlook are the principal explanatory variables behind the determinants of equity line financing.