Pecking Order Theory versus Trade-Off Theory: are service SMEs’ capital structure decisions different?

Zelia Serrasqueiro (), Manuel Armada and Paulo Nunes

Service Business, 2011, vol. 5, issue 4, 409 pages

Abstract: This paper seeks to analyse if the capital structure decisions of service small and medium-sized enterprises (SMEs) are different from those of other types of firm. To do so, we consider four research samples: (i) 610 service SMEs; (ii) 126 service large firms; (iii) 679 manufacturing and construction SMEs; and (iv) 132 manufacturing and construction large firms. Using the two-step estimation method, the empirical evidence obtained in this study shows that the capital structure decisions of service SMEs are different from those of other types of firm. Service SMEs’ capital structure decisions are closer to the assumptions of Pecking Order Theory and further removed from those of Trade-Off Theory compared with the case of other types of firm. Copyright Springer-Verlag 2011

Keywords: Other firms; Pecking Order Theory; Service SMEs; Trade-Off Theory; Two-step estimation method; G32; L80 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s11628-011-0119-5

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