DO LOCAL FINANCIAL AND LEGAL SYSTEMS AFFECT SMES CAPITAL STRUCTURE?

Mariarosaria Agostino (), Maurizio La Rocca, Tiziana La Rocca () and Francesco Trivieri ()
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Francesco Trivieri: Dipartimento di Economia e Statistica, Università della Calabria

No 201009, Working Papers from Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF

Abstract: This paper investigates the role of institutional differences at the local level as determinants of firms’ capital structure. Specifically, its aim is to empirically assess whether and to what extent SMEs’ financial decisions are affected by local financial development – evaluating this influence both ceteris paribus, and by allowing it to be conditional on different levels of legal enforcement inefficiency. Controlling for debt inertia, firms’ heterogeneity and endogeneity problems, we find that local financial development may be an important determinant of SMEs’ capital structure, and that firms appear to have better access to financial debt in areas characterized by a higher quality of the legal system. Thus, despite the international process of capital markets integration, local financial institutions do not seem to become irrelevant for SMEs, which are in need of well developed institutions at local level to gain easier access to external financial resources.

Keywords: Firms’ capital structure; Bank debt; Local financial development; Local enforcement system; SMEs (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cfn
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http://www.ecostat.unical.it/RePEc/WorkingPapers/WP09_2010.pdf First version, 2010-05 (application/pdf)

Related works:
Journal Article: Do local financial and legal systems affect SMEs capital structure? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:clb:wpaper:201009

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