This study examines the impact of mandatory legal form choices on startups' debt financing opportunities. We posit that an entrepreneur's initial legal form decision serves as a reliable signal to outside lenders, reducing adverse selection concerns. Using data from German startups, we find that limited liability companies with low capital requirements disproportionately secure less debt than their high-capital counterparts. This financing disparity is particularly pronounced for younger firms in areas dominated by small relationship banks, but it diminishes with firm age. Our findings highlight the unintended consequences of recent global deregulation efforts. Formal debt financing is arguably the most important source of external financing for startups. Despite its importance, many startups find it challenging to secure such financing due to informational opacity: they lack the track record or publicly available evidence needed to prove that they are a sound investment. This raises a pressing question: How can startups credibly convey their creditworthiness to potential lenders?

中文翻译：

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法律形式在企业债务融资中的信号价值

本研究探讨了强制性法律形式选择对初创企业债务融资机会的影响。我们认为，企业家最初的法律形式决定可以向外部贷款人发出可靠的信号，减少逆向选择的担忧。使用德国初创企业的数据，我们发现资本要求较低的有限责任公司比资本要求较高的有限责任公司所获得的债务要少得多。这种融资差距对于小型关系银行占主导地位的年轻公司来说尤其明显，但随着公司年龄的增长而缩小。我们的研究结果突显了近期全球放松管制努力所带来的意想不到的后果。正式债务融资可以说是初创企业最重要的外部融资来源。尽管它很重要，但由于信息不透明，许多初创公司发现获得此类融资具有挑战性：他们缺乏证明自己是一项合理投资所需的记录或公开证据。这就提出了一个紧迫的问题：初创企业如何才能可靠地向潜在贷款人传达其信用度？