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Culture and capital structure in small and medium sized firms

Author

Listed:
  • 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.

Suggested Citation

  • Brian Lucey & Colm KEarney & Ciaran MacAnBhaird, 2012. "Culture and capital structure in small and medium sized firms," The Institute for International Integration Studies Discussion Paper Series iiisdp419, IIIS.
  • Handle: RePEc:iis:dispap:iiisdp419
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    Cited by:

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    2. Goodell, John W., 2019. "Comparing normative institutionalism with intended rationality in cultural-finance research," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 124-134.

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    More about this item

    Keywords

    Capital structure; SME; Hofstede's cultural values; Europe; Pecking Orde;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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