Empirical research on the financing of small and medium-sized enterprises (SMEs) has focused mainly on theoretical approaches related to hierarchical order and, to a lesser extent, on trade-off theory. However, the financial literature has recently revealed that the life-cycle stages of SMEs influence their financial choices, which may explain why business financing evolves over time. Thus, this paper used a panel data approach to study the impact of life cycle phases on the capital structure of 70 Tunisian industrial SMEs during the period from 2013 to 2016. We found that Tunisian SMEs tended to use debt more intensively in the short term, while long-term debt was rarely used. We also found that the life cycle theory is perfectly adapted to describe the financial behavior adopted by Tunisian SMEs, which tend to use debt (regardless of maturity) during the early life cycle phases. Once SMEs age and mature, other sources of funding take over (mainly self-financing and even an IPO).
Contribution/ Originality:This study is one of very few to investigate the influence of life cycle phases on the capital structure for Tunisian SMEs. The paper's primary contribution is that each source of funding is often adapted to a specific moment in the life cycle of the SME.
1.In Tunisia and according to the National Institute of Statistics (NIS), is considered an SME, any company whose workforce varies between 6 and 199 employees.In addition, there is another definition of SME eligible for intervention by the Industrial Promotion and Decentralization Fund (IPDF), which defines SMEs in the industrial and service sector as those with a total investment not exceeding 10 million dinars (including working capital).