How did the global financial crisis impact the determinants of SMEs' capital structure?

While there is sufficient evidence that a crisis impacts lending behaviour and corporate leverage, the literature on the effects of the global financial crisis on small and medium-sized enterprises (SMEs') capital structure is limited if not absent. This paper aims to analyse how and to what extent various macroeconomic states impact the capital structure determinants of SMEs. Based on a comprehensive dataset of Italian SMEs during the 2006-2016 period, we use a fixed effects panel approach to examine SMEs' capital structure decisions before, during and after the 2008 financial crisis. Our results show that the financial crisis negatively affected SMEs' financial leverage, as the total debt ratio significantly declines in our sample period. However, we also find that the financial crisis negatively impacted trade credit, given that it does not substitute for the reduction of credit from financial institutions. Finally, the impact of capital structure determinants significantly changed during and after the crisis compared to the pre-crisis levels. Our results indicate that compared to the pre-crisis period, profitability, profit volatility and liquidity are the main determinants of the total debt ratio during and after the crisis. These results have implications for firms and policy makers.