Are the determinants of capital structure country or firm specific?

Are the determinants of capital structure country or firm specific? In this paper we investigate the capital structure determinants of Greek, French, Italian, and Portuguese small and medium-sized enterprises (SMEs). We compare the capital structures of SMEs across countries and differences in country characteristics, asset structure, size, profitability, risk, and growth and how these may impact capital structure choices. The results show that SMEs in these countries determine their capital structure in similar ways. We attribute these similarities to the country institutional and financial characteristics and the commonality of their civil law systems. However, structural differences arise due to firm specific effects. We find that size is positively related to leverage while the relationship between leverage and asset structure, profitability and risk is negative. Growth is not a statistically significant determinant of leverage for any of the four countries. Our main conclusion is that firm-specific rather than country facts explain differences in capital structure choices of SMEs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Are the determinants of capital structure country or firm specific?

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Publisher
Springer Journals
Copyright
Copyright © 2008 by Springer Science+Business Media, LLC.
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-008-9103-4
Publisher site
See Article on Publisher Site

Abstract

In this paper we investigate the capital structure determinants of Greek, French, Italian, and Portuguese small and medium-sized enterprises (SMEs). We compare the capital structures of SMEs across countries and differences in country characteristics, asset structure, size, profitability, risk, and growth and how these may impact capital structure choices. The results show that SMEs in these countries determine their capital structure in similar ways. We attribute these similarities to the country institutional and financial characteristics and the commonality of their civil law systems. However, structural differences arise due to firm specific effects. We find that size is positively related to leverage while the relationship between leverage and asset structure, profitability and risk is negative. Growth is not a statistically significant determinant of leverage for any of the four countries. Our main conclusion is that firm-specific rather than country facts explain differences in capital structure choices of SMEs.

Journal

Small Business EconomicsSpringer Journals

Published: Mar 19, 2008

References

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