What do we know about the capital structure of small firms?

What do we know about the capital structure of small firms? Firm data from ten Western European countries is used in this paper to contrast the sources of leverage across small and large, as well as across listed and unlisted firms. Specifically, the explanatory power of firm-specific, country of incorporation institutional, and macroeconomic factors is evaluated. Using data that is more comprehensive in coverage than that used in the existing research the stylized facts of the capital structure literature for large and listed firms is confirmed, but contrasting evidence is obtained for smaller companies. First, the country of incorporation carries much more information for small firms, supporting the idea that small firms are more financially constrained and face non-firm-specific hurdles in their capital structure choice. Second, using two different leverage measures it is shown that the relationship of firm size and tangibility to leverage is robust to the measure used for listed, but not for unlisted firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

What do we know about the capital structure of small firms?

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Publisher
Springer US
Copyright
Copyright © 2012 by Springer Science+Business Media, LLC.
Subject
Economics / Management Science; Management/Business for Professionals; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-012-9440-1
Publisher site
See Article on Publisher Site

Abstract

Firm data from ten Western European countries is used in this paper to contrast the sources of leverage across small and large, as well as across listed and unlisted firms. Specifically, the explanatory power of firm-specific, country of incorporation institutional, and macroeconomic factors is evaluated. Using data that is more comprehensive in coverage than that used in the existing research the stylized facts of the capital structure literature for large and listed firms is confirmed, but contrasting evidence is obtained for smaller companies. First, the country of incorporation carries much more information for small firms, supporting the idea that small firms are more financially constrained and face non-firm-specific hurdles in their capital structure choice. Second, using two different leverage measures it is shown that the relationship of firm size and tangibility to leverage is robust to the measure used for listed, but not for unlisted firms.

Journal

Small Business EconomicsSpringer Journals

Published: Jul 15, 2012

References

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