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Culture and capital structure in small and medium sized firms

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  • Brian Lucey

    ()
    (Institute for International Integration Studies, Trinity College Dublin)

  • Colm KEarney

    ()
    (Monash Business School, Monash University, Melbourne)

  • Ciaran MacAnBhaird

    ()
    (FIONTAR, Dublin City University)

Abstract

Employing 90,000 firm-level observations from 13 countries over a seven year period, and controlling for an extensive set of firm-level characteristics, industry effects and country-level institutional variables, we provide a conceptual framework and empirical analysis of how culture influences capital structure in SMEs. We document hitherto unreported effects. Uncertainty avoidance and individuality are negatively related with long-term debt, highlighting SME owners desire to avoid heightened business risk, reduce interference from debt providers, and maintain autonomy and independence. Negative relationships between power distance and debt suggest a more consultative role with financial institutions, facilitating greater access to debt. Policy makers should take account of the deep and powerful consequences of cultural influences when designing and implementing SME financing initiatives.

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Bibliographic Info

Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp419.

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Length: 15
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:iis:dispap:iiisdp419

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Keywords: Capital structure; SME; Hofstede's cultural values; Europe; Pecking Orde;

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