What Do We Know about the Capital Structure of Small Firms?

CERGE-EI Working Paper No. 283

43 Pages Posted: 8 Jul 2008

See all articles by Karin Jõeveer

Karin Jõeveer

Tallinn University of Technology (TUT)

Date Written: December 2005


There are no stylized facts about the capital structure of small firms. Therefore, in this paper I use firm data from 10 Western European countries to contrast the sources of leverage across small and large firms. Specifically, I jointly evaluate the explanatory power of firm-specific, country of incorporation institutional, and macroeconomic factors. Using data that is more comprehensive in coverage than that used in the existing research, I confirm the stylized facts of the capital structure literature for large and listed firms, but I obtain contrasting evidence for smaller companies: First, the country of incorporation carries much more information for small firms supporting the idea that small firms are more financially constrained and face non-firm-specific hurdles in their capital structure choice. Second, using two different leverage measures I show that the relationship of firm size and tangibility to leverage is robust to the measure used for listed, but not for unlisted, firms.

Keywords: Capital structure, Publicly traded and privately hold companies, Europe

JEL Classification: G32

Suggested Citation

Jõeveer, Karin, What Do We Know about the Capital Structure of Small Firms? (December 2005). CERGE-EI Working Paper No. 283, Available at SSRN: https://ssrn.com/abstract=1148201 or http://dx.doi.org/10.2139/ssrn.1148201

Karin Jõeveer (Contact Author)

Tallinn University of Technology (TUT) ( email )

Ehitajate tee 5
Tallinn, 12618

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