Testing trade-off and pecking order theories financing SMEs

López-Gracia, José; Sogorb-Mira, Francisco

doi:10.1007/s11187-007-9088-4

Cited by 253 publications

(188 citation statements)

References 54 publications

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“…This could be due to the higher accessibility of the data for large and listed companies. Nevertheless, the scientific community has started to pay attention to the small companies as an object of the study (López-Gracia & Sogorb-Mira, 2008). A realization of the significant economic contribution of SMEs has resulted in increased attention focused on the sector from policy-makers and academics.…”

Section: Introductionmentioning

confidence: 99%

The Determinant of Capital Structure of SMEs in Malaysia: Evidence from Enterprise 50 (E50) SMEs

Saarani¹,

Shahadan²

2013

ASS

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Capital structure have implications in determining the ability and success of a firm, especially to small and medium-sized enterprises (SMEs). This paper analyses the capital structure of SMEs in Malaysia focusing on Enterprise 50 (E50) SMEs. E50 is an annual awards program initiated by government and organized by SME Corporation & Deloitte Malaysia since 1997 to recognize the 50 best SME companies in Malaysia based on their performances and potential to succeed. The secondary data from Companies Commission of Malaysia has been collected for the study. The study employed regression analysis on 334 companies, utilised the accounting data for the five year period of 2005 to 2009. Capital structure is the Dependent Variable referring to debt ratio of the companies, decomposed into Long Term Debt ratio and Short term Debt ratio. The Independent Variables (IV) are age; size; tangibility; liquidity; profitability; growth and taxation. Two theories of capital structure have guided this study i.e. the Trade-Off Theory and the Pecking Order Theory. The study found that size is important if we decomposed the debt into longand short term. In addition, asset tangibility, liquidity and profitability are the main capital structure determinants for SMEs. Age and growth are important for a long term, while taxation is not an important consideration in capital structure decision.

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Section: Introductionmentioning

confidence: 99%

The Determinant of Capital Structure of SMEs in Malaysia: Evidence from Enterprise 50 (E50) SMEs

Saarani¹,

Shahadan²

2013

ASS

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“…Therefore, various patterns of debt can be observed that depend on certain characteristics of the company, the sector, and/or the geographical zone. In general, the relationships between these factors and the capital structure choices on SMEs are basically explained by two main theories (López-Gracia and Sogorb-Mira 2008). On the one hand, the trade-off theory that suggests that there is an optimum capital structure for each firm.…”

Section: Literature Review: Theory and Evidencementioning

confidence: 99%

Regional development and capital structure of SMEs

Pietro¹,

Sánchez²,

Roldán³

2018

cuadernosgestion

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This article studies the influence of regional institutional environment, measured as regional development, on capital structure of small and medium-sized enterprises (SMEs). Furthermore, the standard firm-factor determinants and the business sector of the firm are also incorporated. To this end, a sample of 6,560 Spanish firms for 2007 is analysed, where all regions of Spain and all sectors, except the financial sector, are considered. Spain provides a suitable and unexplored laboratory for the analysis of regional differences in the financial structure of SMEs, since, on the one hand, SMEs constitute the most relevant firms in this country, and on the other hand, Spain shows regional disparities at various levels. Moreover, the empirical analysis uses Partial Least Squares (PLS), a variance-based structural equation modelling (SEM). In this respect, PLS has several clear advantages to multiple linear regression (MLR). Thanks to this study, how each of these factors explains the variation in the capital structure could be shown. Moreover, the results show that although firm factors and the business sector explain a large proportion of the variance of capital structure of SMEs, it is important to take into account the regional institutional environment to better ascertain the level of debt of SMEs in a single country.

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“…Even though stock returns are not observable for the majority of firms in our sample, note that Bae et al (2002) show that operating performance and stock performance behave qualitatively similar for these types of analyses. 4 For example, López-Gracia and Sogorb-Mira (2008) found that (Spanish) SMEs behave like predicted by the pecking order theory, which is based on the work by Myers and Majluf (1984). The theory states that there is no target capital structure towards which firms converge.…”

Section: Propensity Score Matchingmentioning

confidence: 99%

The Issuance of German SME Bonds and its Impact on Operating Performance

Feihle

Lawrenz

2017

Schmalenbach Bus Rev

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This article investigates the post-issuance performance of firms in the German SME Bond (Mittelstandsanleihen) market segment. In particular, we ask if issuers' operating performance is significantly different relative to an ex-ante indistinguishable non-issuer control sample. To properly identify the comparison sample and avoid endogeneity concerns, we implement a propensity score matching process based on a set of financial variables. Our main results show that issuers actually display lower post-issuance operating performance which amplifies their financial fragility. Our results contribute to the discussion if the poor performance of this market segment could have been identified ex-ante.

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Testing trade-off and pecking order theories financing SMEs

Abstract: Pecking order, Trade-off, Capital structure, Small- and Medium-Sized Enterprises, G32, C33, L26,

Cited by 253 publications

References 54 publications

The Determinant of Capital Structure of SMEs in Malaysia: Evidence from Enterprise 50 (E50) SMEs

The Determinant of Capital Structure of SMEs in Malaysia: Evidence from Enterprise 50 (E50) SMEs

Regional development and capital structure of SMEs

The Issuance of German SME Bonds and its Impact on Operating Performance

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