Abstract
Empirical evidence from previous studies (Sogorb Mira 2005) and reports (Brierley and Kearns 2001; Cole 2008) suggests that firm characteristics such as size, age, growth, and profitability have a significant influence on a firm’s capital structure. Additionally, a number of studies suggest that asset structure is a primary determinant of firm financing (Bartholdy and Mateus 2008), implying inter-industry differences in capital structures, as firms in industries typified by greater levels of collateralisable assets have the capacity for, and may employ, greater levels of debt than firms with a higher concentration of intangible assets (Brierley and Kearns 2001). Indeed, intra-industry capital structures may be more comparable than inter-industry capital structures (Harris and Raviv 1991). In this chapter, the potential determining effect of firm characteristics on the source of finance employed is investigated by testing a number of multivariate regression models on financing data of firms in the sample. Whilst the multivariate regression approach employed in this study is not original, there are a number of novel features in the statistical methodology adopted and variables tested. Application of regression analysis on survey data is uncommon in finance (De Jong and Van Dijk 2007), particularly in SME finance, as previous empirical theory testing studies conducted multivariate regression models on panel data (Heyman et al. 2008; López-Gracia and Sogorb-Mira 2008). Additionally, this study employs data on sources of internal and external equity, in addition to debt, as dependent variables in regression models. This approach is an advancement on previously published studies, which typically tested regression models employing short- and long-term debt as dependent variables (Heyman et al. 2008), with very few published studies employing a measure of equity as a dependent variable (Ou and Haynes 2006), and none employing both measures. (The dearth of studies employing internal equity as a dependent variable is surprising, considering the well-documented reliance of SMEs on retained earnings (Vos et al. 2007; Cole 2008)). Furthermore, this study employs detailed data on provision of collateral by respondents as an independent variable. This approach is considered novel, as models developed in previous studies typically test firm characteristics such as age, profitability, and size, but do not include means of collateral provision.
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an Bhaird, C.M. (2010). SME Financing: Investigation of Firm and Industry Effects. In: Resourcing Small and Medium Sized Enterprises. Contributions to Management Science. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-2399-8_3
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