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Pecking Order Versus Trade-Off: An Empirical Approach To The Small And Medium Enterprise Capital Structure

  • Francisco Sogorb- Mira

    (Universidad CEU Cardenal Herrera)

  • José Lopez- Gracia

    (Universitat de València)

Registered author(s):

    In this paper, we explore two of the most relevant theories that explain financial policy in small and medium enterprises (SMEs): pecking order theory and trade-off theory. Panel data methodology is used to test the empirical hypotheses over a sample of 6482 Spanish SMEs during the five-year period 1994?1998. The results suggest that both theoretical approaches contribute to explain capital structure in SMEs. However, while we find evidence that SMEs attempt to achieve a target or optimum leverage (trade-off model), there is less support for the view that SMEs adjust their leverage level to their financing requirements (pecking order model). En este trabajo, exploramos dos de las teorías más relevantes que explican lapolítica de financiación de la pequeña y mediana empresa: la selección jerárquica y elequilibrio estático. El contraste de hipótesis se lleva a cabo con metodología de datos depanel, a partir de una muestra de 6482 pymes españolas, que presentan informaciónfinanciera a lo largo del periodo 1994-1998. Los resultados indican que ambos enfoquescontribuyen a explicar la estructura de capital de las pymes, si bien mientras que seconfirma la existencia de un endeudamiento objetivo u óptimo que estas empresas tratande alcanzar (modelo de equilibrio estático), no parece quedar claro que ajusten su nivelde deuda a sus necesidades de financiación (modelo de selección jerárquica).

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    File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-2003-09.pdf
    File Function: Fisrt version / Primera version, 2003
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    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 2003-09.

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    Length: 36 pages
    Date of creation: Jun 2003
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasec:2003-09
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