The principal aim of this paper is to test how firm characteristics affect Small and Medium Enterprise (SME) capital structure. We carry out an empirical analysis of panel data of 6482 non-financial Spanish SMEs during the five years period 1994–1998, modelling the leverage ratio as a function of firm specific attributes hypothesized by capital structure theory. Our results suggest that non-debt tax shields and profitability are both negatively related to SME leverage, while size, growth options and asset structure influence positively SME capital structure; they also confirm a maturity matching behaviour in this firm group. Copyright Springer 2005capital structure, financing, panel data, pecking order theory, SME, trade-off theory, C23, G32, G33,
IVIE working papers offer in advance the results of economic research under way in order to encourage a discussion process before sending them to scientific journals for their final publication. *. The author would like to express his gratitude to J. Carlos Gómez Sala for his inestimable help and encouragement and to Manuel Arellano, José López Gracia and Javier Suárez for their invaluable comments on earlier drafts. The author would also like to thank the participants at the 8 th Annual Conference of the Multinational Finance Society (Italy, June 2001) for their helpful comments to a preliminary version of this paper, and the insightful suggestions by an anonymous referee. Any errors or omissions are the sole responsibility of the author.
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