The importance of owner loans for rebalancing the capital structure of small knowledge-intensive service firms
Zélia Serrasqueiro and
Manuel Rocha Armada
Research in International Business and Finance, 2022, vol. 61, issue C
The purpose of this study is to analyze the financing behaviors of young and old small knowledge-intensive service (SKIS) firms, giving particular attention to the relationship between owner loans and the level of indebtedness and to the effect of owner loans on rebalancing the capital structure of such firms. Using dynamic panel data, this study used two samples, one with 421 young SKIS firms and another with 1353 old SKIS firms. Based on the findings, the financing behaviors of both the young and old firms closely resembled the predictions of the pecking order theory. However, the young SKIS firms attempted to rebalance their capital structure, being able to renegotiate credit under favorable terms, while the old SKIS firms slowly adjusted, suggesting the presence of high transaction costs. Regarding owner loans, they positively impacted the adjustment speed, with greater magnitude on the old SKIS firms.
Keywords: Owner loans; Pecking order theory; Small- and medium-sized knowledge-intensive service firms; Trade-off theory (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:61:y:2022:i:c:s0275531922000459
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