ABSTRACT
Prior research consistently reports that female-owned ventures typically have lower overall capitalization rates than male-owned ventures (Carter, Shaw, Lam and Wilson, 2007), and this applies to both external (bank) debt and the equity contributed by venture owners. However, the reasons for the observed capitalization differences between male- and female-owned ventures are not clear. Some authors have suggested that the observed capitalization differences are the result of discrimination against women by the banking sector; indeed, Fay and Williams (1993, p. 363) note that “there is a widely held view that women are subject to discrimination by financial institutions.” Further, Carter, Mwaura, Ram, Trehan and Jones (2015, p. 57) suggest that being able to access external (bank) finance “has long been regarded as the major obstacle preventing women from starting and growing a successful enterprise.” Should this be true, it raises major concerns for both the banking sector and governments focused on trying to stimulate their economies by promoting the establishment and growth of new female-owned ventures. However, there is another school of thought that suggests that the observed capitalization differences between male- and female-owned ventures are largely (if not entirely) driven by demand-side factors; namely, the characteristics of venture owners (for example, their risk aversion and growth aspirations) and their businesses (in particular, the industry sector in which the business operates). The purpose of the study in this chapter, therefore, is to determine whether supply-side discrimination or demand-side disinclination best explains observed capitalization differences between male- and female-owned new ventures.
