New approaches to the analysis of the capital structure of SME's: empirical evidence from Spanish firms

The main objective of this paper is to analyze the factors determining the capital structure of Spanish small and medium-sized enterprises. This analysis is grounded on agency theory, pecking order theory, and the signaling approach. The following elements were taken into consideration: i) the quantitative variables of the enterprises, and ii) qualitative or strategic variables, finally providing an analysis of the explanatory power of the firms' reputation, the ownership and control structure, and the relationship between the SMEs and the finance company. A definition of the relationships which might be expected between the proposed variables and the total borrowing ratio, according to the conceptual framework under consideration was given as well. A survey of 410 Spanish SMEs was considered in the empirical analysis. Firstly, we divided the survey into groups, according to the debt-equity ratio, and the application of an ANOVA test, then we tested for significant differences in the variables for each group. Next, we established a model of hierarchical regression for an overall comparison of the hypotheses that the theoretical model provided. Among the most relevant results, we should highlight that the only proposed hypotheses to be tested were those referring to the variables: 'number of finance companies' and 'existence of real covenants unrelated to the business'. It may be said that dealing with a greater number of companies and establishing a personal covenant increases the possibility of fund-raising on the credit market, thereby avoiding a situation of credit rationing. However, there is no confirmation of the explanatory power of the reputation or the ownership and control structure variables.