SMEs´ Capital Structure Decisions: Empirical Evidence from a Peripheral Region of Portugal

Resumo/Abstract: Based on a sample of SMEs located in the interior region of Portugal for the period 1998-2005, using the LSDVC dynamic estimator as method of estimation, this study tests whether the capital structure decisions of SMEs in that region are closer to the assumptions of Trade-Off Theory or to those of Pecking Order Theory. The empirical evidence obtained allows us to conclude that Trade-Off and Pecking Order Theories are not mutually exclusive in explaining the capital structure decisions of SMEs. The most profitable and oldest SMEs resort less to debt, which corroborates the forecasts of Pecking Order Theory, whereas the largest SMEs resort more to debt, corroborating the forecasts of Trade-Off Theory and Pecking Order Theory. In addition, SMEs adjust considerably their current level of debt towards target debt ratio, which corroborates what is forecast by Trade-Off Theory.

Outros seminários / Other seminars: Programa completo / Full programme.