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Small Firms’ Capital Structure and Performance

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  • Samal Kokeyeva
  • Petr Hajek
  • Ainagul Adambekova

Abstract

The article examines the existence and strength of capital structure determinants on SMEs’ financial performance. We tested predictions using a panel of 230 SMEs during 2015-2019 in Kazakhstan. The study is one of the few studies investigating the capital structure of small business companies’ profitability in developing countries. The empirical analysis’s main conclusions show the negative impact of all debt levels on the return on assets and the direct interaction between the debt burden and equity. The findings show that industry effects are significant in explaining SMEs’ capital structure decisions. The results generally suggest that following the pecking order theory, owners of small firms maximize their retained earnings and raise debt only when additional funding is needed.

Suggested Citation

  • Samal Kokeyeva & Petr Hajek & Ainagul Adambekova, 2022. "Small Firms’ Capital Structure and Performance," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 128-144.
    • Handle: RePEc:bas:econst:y:2022:i:4:p:128-144
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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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