Pecking order versus trade-off: an empirical approach to the small and medium enterprise capital structure

• Autores: José López Gracia, Francisco Sogorb Mira
• Localización: Working papers = Documentos de trabajo: Serie EC - (Instituto Valenciano de Investigaciones Económicas), Nº. 9, 2003, 36 págs.
• Idioma: inglés
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• Dialnet Métricas: 6 Citas
• Resumen

  • In this paper, we explore two of the most relevant theories that explain financial policy in small and medium enterprises (SMEs): pecking order theory and trade-off theory. Panel data methodology is used to test the empirical hypotheses over a sample of 6482 Spanish SMEs during the five-year period 1994?1998. The results suggest that both theoretical approaches contribute to explain capital structure in SMEs. However, while we find evidence that SMEs attempt to achieve a target or optimum leverage (trade-off model), there is less support for the view that SMEs adjust their leverage level to their financing requirements (pecking order model).