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Growth history, knowledge intensity and capital structure in small firms

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  • Stewart Thornhill
  • Guy Gellatly
  • Allan Riding

Abstract

This paper explores the financial characteristics of successful Canadian small- and medium-sized enterprises (SME). It asks whether industry membership and early growth history play a role in shaping these financial characteristics. Our study reveals a strong correlation between capital structure and knowledge intensity. In contrast, growth histories are not obvious determinants of financial structure. Results also suggest that leverage strategies are more apparent in low-knowledge industries, in firms with higher expectations of future performance, and in businesses with more balanced financial structures. Industry comparisons are based on production activity and knowledge intensity. Growth distinctions are based on the firm's employment and sales history. We evaluate our hypotheses with survey data from a stratified random sample of 2775 Canadian firms. Proportional weighting techniques are utilized in all analyses.

Suggested Citation

  • Stewart Thornhill & Guy Gellatly & Allan Riding, 2003. "Growth history, knowledge intensity and capital structure in small firms," Venture Capital, Taylor & Francis Journals, vol. 6(1), pages 73-89, October.
    • Handle: RePEc:taf:veecee:v:6:y:2003:i:1:p:73-89
    DOI: 10.1080/1369106042000175591
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    References listed on IDEAS

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    1. Peters, Alice & Beckstead, Desmond & Gellatly, Guy & Baldwin, John R. & Yates, Janice, 2000. "Patterns of Corporate Diversification in Canada: An Empirical Analysis," Analytical Studies Branch Research Paper Series 2000150e, Statistics Canada, Analytical Studies Branch.
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    Cited by:

    1. Pietro Dallari & Nicolas End & Fedor Miryugin & Alexander F. Tieman & Seyed Reza Yousefi, 2020. "Pouring oil on fire: interest deductibility and corporate debt," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(6), pages 1520-1556, December.
    2. Miroslav Mateev & Yanko Anastasov, 2010. "Determinants of small and medium sized fast growing enterprises in central and eastern Europe: a panel data analysis," Financial Theory and Practice, Institute of Public Finance, vol. 34(3), pages 269-295.
    3. repec:zbw:bofitp:2011_011 is not listed on IDEAS
    4. Havrylchyk, Olena, 2012. "The effect of foreign bank presence on firm entry and exit in transition economies," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1710-1721.
    5. Hamid Reza Ranjbar Jamalabadi & Ghasem Rayati Shavazi & Jalil Jalili & Fatemah Shirgholami, 2014. "Investigate the Relationship between Age of Fixed Assets whit Co-Financing Ratio," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(1), pages 103-108, January.
    6. Tevfik Aktekin & Dev K. Dutta & Jeffrey E. Sohl, 2018. "Entrepreneurial firms and financial attractiveness for securing debt capital: a Bayesian analysis," Venture Capital, Taylor & Francis Journals, vol. 20(1), pages 27-50, January.
    7. Olena Havrylchyk, 2010. "Foreign Bank Presence and its Effect on Firm Entry and Exit in Transition Economies," Working Papers 2010-10, CEPII research center.
    8. David B. Audretsch & Werner Bönte & Prashanth Mahagaonkar, 2007. "Nascent Entrepreneurs, Innovation and Financing Constraints," DRUID Working Papers 07-09, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.

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