Financial Processes in Newly-Founded Firms

Abstract

ERKKI K. LAITENEN IS ASSOCIATE professor in accounting at the School of Business, University of Vaasa, Finlanid. The purpose of the study is to identify financial processes followed by Finnish newly-founded firms in their first years of life. Special attention is paid to analysing the relationship between the type of process and the status of the firm (failing/non-failing). The identification of the processes is made by factor analysis applied to selected financial variables in the first four years after foundation. This methodology is similar to that used to identify financial patterns but it is applied here to financial variables from several years simultaneously. The results of the study are tentative because of the small sample size. The results may, however, help new entrepreneurs, venture capitalists and financiers to identify and avoid risky financial processes in the early years.