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Do local financial and legal systems affect SMEs capital structure?

Author

Listed:
  • Mariarosaria Agostino

    (University of Calabria)

  • Maurizio La Rocca

    (University of Calabria)

  • Tiziana La Rocca

    (University of Calabria)

  • Francesco Trivieri

    (University of Calabria)

Abstract

This note investigates the role of institutional differences at the local level as determinants of firms' capital structure. Specifically, its aim is to empirically assess whether and to what extent SMEs' financial decisions are affected by local financial development – evaluating this influence both ceteris paribus, and by allowing it to be conditional on different levels of legal enforcement inefficiency. Controlling for debt inertia, firms' heterogeneity and endogeneity problems, we find that local financial development may be an important determinant of SMEs' capital structure, and that firms appear to have better access to financial debt in areas characterized by a higher quality of the legal system. Thus, despite the international process of capital markets integration, local financial institutions do not seem to become irrelevant for SMEs, which are in need of well developed institutions at local level to gain easier access to external financial resources.

Suggested Citation

  • Mariarosaria Agostino & Maurizio La Rocca & Tiziana La Rocca & Francesco Trivieri, 2012. "Do local financial and legal systems affect SMEs capital structure?," Economics Bulletin, AccessEcon, vol. 32(1), pages 260-271.
    • Handle: RePEc:ebl:ecbull:eb-11-00759
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    References listed on IDEAS

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    Cited by:

    1. Annamaria Nifo & Sabrina Ruberto & Gaetano Vecchione, 2018. "Does institutional quality matter for lending relationships?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 8(2), pages 1-4.
    2. Falavigna, Greta & Ippoliti, Roberto, 2023. "SMEs’ behavior under financial constraints: An empirical investigation on the legal environment and the substitution effect with tax arrears," The North American Journal of Economics and Finance, Elsevier, vol. 66(C).
    3. Fasano, Francesco & Rocca, Maurizio La & Cariola, Alfio & Passarelli, Mariacarmela, 2023. "Banking relationship and research spin-offs’ life cycle: The Italian experience," Research in International Business and Finance, Elsevier, vol. 65(C).
    4. repec:spt:apfiba:v::y:2018:i::f:8_2_4 is not listed on IDEAS
    5. Nifo, Annamaria & Ruberto, Sabrina & Vecchione, Gaetano, 2016. "Does institutional quality matter for lending relationships? Evidence from Italy," MPRA Paper 75279, University Library of Munich, Germany.

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    More about this item

    Keywords

    firms' capital structure; bank debt; local financial development; local enforcement system; SMEs.;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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