PECKING ORDER VERSUS TRADE-OFF: AN EMPIRICAL APPROACH TO THE SMALL AND MEDIUM ENTERPRISE CAPITAL STRUCTURE

Francisco Sogorb- Mira and José Lopez- Gracia
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Francisco Sogorb- Mira: Universidad CEU Cardenal Herrera
José Lopez- Gracia: Universitat de València

Working Papers. Serie EC from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: 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). En este trabajo, exploramos dos de las teorías más relevantes que explican lapolítica de financiación de la pequeña y mediana empresa: la selección jerárquica y elequilibrio estático. El contraste de hipótesis se lleva a cabo con metodología de datos depanel, a partir de una muestra de 6482 pymes españolas, que presentan informaciónfinanciera a lo largo del periodo 1994-1998. Los resultados indican que ambos enfoquescontribuyen a explicar la estructura de capital de las pymes, si bien mientras que seconfirma la existencia de un endeudamiento objetivo u óptimo que estas empresas tratande alcanzar (modelo de equilibrio estático), no parece quedar claro que ajusten su nivelde deuda a sus necesidades de financiación (modelo de selección jerárquica).

Keywords: selección jerárquica; equilibrio estático; estructura de capital; pymes; datos de panel. Pecking Order; Trade-off; Capital Structure; Small and Medium Enterprises; Panel Data. (search for similar items in EconPapers)
JEL-codes: C34 G32 G33 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2003-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasec:2003-09

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