Determinants of capital structure in Irish SMEs

By C. Mac an Bhaird, Brian M. Lucey. 2010

340 citations recorded by the source corpus.

This paper presents an empirical examination of determinants of the capital structure of a sample of 299 Irish small and medium-sized enterprises (SMEs). Results suggest that age, size, level of intangible activity, ownership structure and the provision of collateral are important determinants of the capital structure in SMEs. A generalisation of Zellner’s (Journal of the American Statistical Association57, 348–368, 1962) seemingly unrelated regression (SUR) approach is used to examine industry effects and to test the stability of parameter estimates across sectors. We find that the influence of age, size, ownership structure and provision of collateral is similar across industry sectors, indicating the universal effect of information asymmetries. Firms overcome the lack of adequate collateralisable firm assets in two ways: by providing personal assets as collateral for business debt, and by employing additional external equity to finance research and development projects.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/f955ae47fb23bc5fc9bb57ff6364d8a18e01e5c0

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Citations in the corpus

A conceptual framework for identifying financing preferences of SMEs (2015, background): “However, in order to avoid conflict between owner-managers and lenders, firms prefer less debt in case of highgrowth opportunities for a short duration (Abor & Biekpe, 2009; Mac an Bhaird & Lucey, 2010; Odit & Gobardhan, 2011; Sogorb-Mira, 2005; Zhang, 2010).”
Trade-Off Theory versus Pecking Order Theory: capital structure decisions in a peripheral region of Portugal (2014, background): “Additionally, a negative relationship between age and debt was identified by Michaelas et al. (1999) for British SMEs, Bhaird and Lucey (2010) for Irish SMEs, and La Rocca et al. (2011) for Italian SMEs.”
Bank credit and trade credit: Evidence from SMEs over the financial crisis (2016, neutral): “Tangible assets are a good indicator of collateral, which is previously found to alleviate the problems of information asymmetries for SMEs accessing bank debt (Mac an Bhaird and Lucey, 2010).”
A systematic literature review on SME financing: Trends and future directions (2021, background): “The capital structure of SMEs is primarily affected by firm- and industryspecific features (Aybar-Arias et al., 2012; Degryse et al., 2012; Mac an Bhaird & Lucey, 2010), business ownership (Hutchinson, 1995; Molly et al., 2019), disclosure requirements, agency cost and information asymmetry, and…”
Financing patterns of European SMEs – an empirical taxonomy (2016, neutral): “Mac an Bhaird and Lucey (2010) Firm age, size, level of intangible activity, ownership structure and the provision of collateral important determinants of SME financing.”