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Capital structure and financing of SMEs: Australian evidence
Author(s) -
Cassar Gavin,
Holmes Scott
Publication year - 2003
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/1467-629x.t01-1-00085
Subject(s) - pecking order theory , capital structure , profitability index , pecking order , asset (computer security) , internal financing , finance , external financing , order (exchange) , panel data , financial structure , business , economics , monetary economics , econometrics , information asymmetry , debt , computer security , evolutionary biology , biology , computer science
This paper investigates the determinants of capital structure and use of financing for small and medium sized enterprises. Hypotheses utilising static trade‐off and pecking order arguments are empirically examined using a series of firm characteristics including: size, asset structure, profitability, growth and risk. The hypotheses developed are tested using a large Australian nationwide panel survey. The results suggest that asset structure, profitability and growth are important determinants of capital structure and financing. For asset structure the direction of the influence is reliant upon the capital structure or financing measure employed. The results generally support static trade‐off and pecking order arguments proposed by theoretical models.