Determinants of capital structure in Irish SMEs

Determinants of capital structure in Irish SMEs This paper presents an empirical examination of determinants of the capital structure of a sample of 299 Irish small and medium-sized enterprises (SMEs). Results suggest that age, size, level of intangible activity, ownership structure and the provision of collateral are important determinants of the capital structure in SMEs. A generalisation of Zellner’s (Journal of the American Statistical Association 57, 348–368, 1962) seemingly unrelated regression (SUR) approach is used to examine industry effects and to test the stability of parameter estimates across sectors. We find that the influence of age, size, ownership structure and provision of collateral is similar across industry sectors, indicating the universal effect of information asymmetries. Firms overcome the lack of adequate collateralisable firm assets in two ways: by providing personal assets as collateral for business debt, and by employing additional external equity to finance research and development projects. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Determinants of capital structure in Irish SMEs

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Publisher
Springer US
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/s11187-008-9162-6
Publisher site
See Article on Publisher Site

Abstract

This paper presents an empirical examination of determinants of the capital structure of a sample of 299 Irish small and medium-sized enterprises (SMEs). Results suggest that age, size, level of intangible activity, ownership structure and the provision of collateral are important determinants of the capital structure in SMEs. A generalisation of Zellner’s (Journal of the American Statistical Association 57, 348–368, 1962) seemingly unrelated regression (SUR) approach is used to examine industry effects and to test the stability of parameter estimates across sectors. We find that the influence of age, size, ownership structure and provision of collateral is similar across industry sectors, indicating the universal effect of information asymmetries. Firms overcome the lack of adequate collateralisable firm assets in two ways: by providing personal assets as collateral for business debt, and by employing additional external equity to finance research and development projects.

Journal

Small Business EconomicsSpringer Journals

Published: Jan 6, 2009

References

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