Firm-level determinants of financial leverage in SMEs: Evidence from the UK information technology sector

Ahmad Nasiri, Mohammad Sadegh Ghasemi and Nastaran N. Richards-Carpenter

Journal of the International Council for Small Business, 2025, vol. 6, issue 4, 899-912

Abstract: Using a sample of 88 firms listed on the Alternative Investment Market of the London Stock Exchange, this article examines the firm-level determinants of financial leverage in small and medium-sized enterprises (SMEs) within the UK information technology (IT) sector. Specifically, it explores the ways financing decisions in IT SMEs differ from those in other sectors by assessing key firm characteristics—asset structure, firm size, asset utilization ratio, liquidity, profitability, and tax rate—and tests the applicability of trade-off and pecking order theories in explaining their financial behavior. This study contributes to the literature by revealing unique leverage behaviors in IT SMEs, highlighting firm-specific factors that shape financing decisions, and offering insights into the applicability of financial leverage theories in emerging sectors.

Date: 2025
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DOI: 10.1080/26437015.2025.2457153

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