Do country or firm factors explain capital structure? Evidence from SMEs in France and Greece

Abstract

We investigate the capital structure determinants of small and medium sized enterprises (SMEs) using a sample of Greek and French firms. We address the following questions: Are the capital structure determinants of SMEs in the two countries driven by similar factors? Are potential differences driven by country-specific or firm-specific factors? Are the size and structure of their financial markets important factors to explain any cross-country differences on SME capital structure? To answer these questions we apply panel data methods to the sample of firms for the period 1998 to 2002. We assess the extent to which the debt to assets ratio of firms depends upon their asset structure, size, profitability and growth rate. The results show that the SMEs in both countries exhibit similarities in their capital structure choices. Asset structure and profitability have a negative relationship with leverage, whereas firm size is positively related to their debt to assets ratio. Growth is statistically significant only for France and is positively related to debt. We attribute these similarities to their institutional characteristics and in particular the commonality of their civil law systems. We find differences in the intensity of the capital structure relationship between the two countries. We provide evidence that these differences are due to firm-specific rather than country factors.

The Relationship between Capital Structure and Performance in Gulf Countries Banks: A Comparative Study between Islamic Banks and Conventional Banks

“…12;2015 ROA as performance measurement is negatively related to the financial leverage which is aligned with the results of Maksimovic and Titman (1991), Myers (1977) and Coricelli et al (2012). This result is either aligned with the Standard pecking order theory and the findings of Rajan and Zingales (1995);Fama and French (2002); Delcoure (2007); Daskalakis and Psillaki (2008);Chakraborty (2010); Kayo and Kimura (2011);Joeveer (2013);Chakraborty (2013);Dang (2013).…”

“…The explanation provided by Myers for the pecking order theory is based on the information asymmetry assumption where firm insiders have more information than outsiders (Chakroborty, 2010). According to the pecking order theory, firms with higher profitability will prefer internal financing to debt and hence a negative relationship is expected between profitability and leverage theory (Rajan & Zingales, 1995;Fama & French, 2002;Delcoure, 2007;Daskalakis & Psillaki, 2008;Chakraborty, 2010;Kayo & Kimura, 2011;Joeveer, 2013;Chakraborty, 2013;Dang, 2013).…”

Determinants of Capital Structure: The Evidence from European Energy Companies

“…Debt level differences are, being independent of predetermined capital structures as ever, contingent upon the need of further debt following the use of equity choice in order to attain new profitable investment opportunities. According to this theory, companies do not aim for target leverage and leverage ratios are realized in compliance with the difference between retained earnings and investments (Daskalakis and Psillaki, 2008;Frydenberg, 2004;Mira and Gracia, 2003). Companies' debt financing requirements are defined by their own debt ratios.…”

Determinants of Capital Structure: Evidence from Indian Stock Market with Special Reference to Capital Goods, FMCG, Infrastructure and IT sector

“…But results of some empirical studies did not support this theoretical relation for example, Shah and Khan (2007) and Mishra & Tannous (2010). Empirical findings of Chiarella et al (1992), Pandey (2001), Jõeveer (2006, Daskalakis & Psillaki (2008), and Gill et al, (2009) and Afza & Hussain (2011), do not support this theoretical relation.…”