Determinants of capital structure in Russian small and medium manufacturing enterprises

Abstract

Research background: Capital structure decisions are very important for any kind of business, but they have a special meaning for small and medium enterprises (SMEs), because their strategic miscalculations can lead to a crisis or even bankruptcy much faster due to the limited scope of their activities.
 Purpose of the article: The research investigates the basic theories of capital structure and their applicability to SMEs considering the specificities of their functioning. The study aims to identify the determinants of SMEs own and borrowed funds ratio and the main driving forces of their financial decisions. The paper identifies the reasons why SMEs have difficulties in attracting borrowed funds and problems with collateral provision. The paper also presents the dynamics of the capital structure and the composition of the borrowed funds in Russian SMEs.
 Methods: The research is based on the panel data of Russian manufacturing SMEs in the period of years 2010–2018. The panel data is unbalanced to avoid a survival bias. The financial ratios selected as variables was calculated using consolidated financial statements published by Russian Federal State Statistics Service. The statistical relations between the indicators were performed by a fixed effects regression with a dummy.
 Findings & Value added: The results of the research identified that current liquidity and asset structure have the statistically significant negative impact on the financial leverage in Russian manufacturing SMEs. The determinants of capital structure in Russian SMEs have not been investigated before, so the presented empirical findings are novel and can be used as a base for further research and analysis.

Unravelling trends, patterns and intellectual structure of research on bankruptcy in SMEs: A bibliometric assessment and visualisation

“…This cluster's research shed light on bankruptcy in tandem with capital structure in MSEs. For example [ 118 ], explains the causes of SMEs' difficulties in obtaining loans and issues with collateral provision. The findings revealed that the existing asset structure and liquidity significantly influence financial leverage [ 119 ].…”

Valuation of Embedded Options in Non-Marketable Callable Bonds: A New Numerical Approach

“…As a result, risky debt issuers might "pass up" positive net present value projects because managers assume that bondholders will benefit more than shareholders will. Consequently, the firms with high default risk will suffer from the lack of positive NPV projects (Panova, 2020;Kaczmarek et al, 2021;Valaskova et al, 2021aValaskova et al, , 2021bKaras & Režňáková, 2021). Bodie and Taggart (1978) and Barnea et al (1980) argue that the underinvestment problem can be resolved with callable bonds.…”

Application of Canonical Variate Analysis to Compare Different Groups of Food Industry Companies in Terms of Financial Liquidity and Profitability

“…From the group of traditional liquidity ratios in this study, two fundamental ones were used, namely the current ratio (y 1 ) and the quick ratio (y 2 ). The former is determined by dividing total current assets by total current liabilities [43]. The latter provides a more narrow focus and concerns only such items of current assets as accounts receivable, cash, and marketable securities.…”

“…Therefore, in the full assessment of payment capacity, companies should also use solvency ratios to assess the ability to pay bills in the long term. One of the fundamental solvency ratios is the total debt (y 6 )-leverage ratio that defines the share of short-term and long-term debt (total debt) relative to assets owned by a company [43]. Using this metric, one can compare a company's leverage with other companies in the same industry.…”