Do crises impact capital structure? A study of French micro-enterprises

This article analyses the impact of the global crisis on the relationship between firm-related factors (size, tangible and intangible assets, growth, and profitability) and the capital structure of French micro-enterprises. A panel of 4945 firms are studied comparatively over two periods: before (2003-2007) and during (2008-2013) the global crisis. During the global crisis, microenterprises survive by relying mostly on internal sources of financing. External leverage is reduced, as the increased information asymmetry and default risk raise the cost of debt. When necessary, micro-enterprises sell the underused or unnecessary tangible assets, as they focus on their main competence and develop their intangible assets: human skills, advertising, networking, brand name, and awareness. In addition, we show that the pecking order is the most relevant theory for predicting the financial decisions and situation of French MEs. These results provide interesting insights into the financial strategy of French micro-enterprises, facilitating understanding and action at academic and policy levels. Keywords Micro-enterprises. Capital structure. Firmrelated factors. Global crisis JEL classifications G32. L26 1 Following Benkraiem (2016), we refer to these crises as the global crisis hereafter. Furthermore, for simplicity reasons, Bcrisis^and Bglobal crisis^are used interchangeably.