Using theoretical arguments grounded in venture financing literature and signaling theory, we develop two new concepts, the venture’s emergent volatility of size and deliberate diversity of the financing portfolio, and test the signaling impact of these two attributes on a venture’s creditworthiness using a multilevel approach. In doing so, we make use of hierarchical Bayesian models with beta distributed likelihoods and use Markov chain Monte Carlo methods to obtain model parameters. Ours is probably the first empirical study to examine creditworthiness of entrepreneurial firms based on emergent volatilities as well as deliberate diversities, and contrasted for entrepreneurial ventures in manufacturing versus services.
