Local Financial Development and SMEs Capital Structure: An Empirical Investigation

27 Pages Posted: 14 Feb 2009

See all articles by Mariarosaria Agostino

Mariarosaria Agostino

Università degli Studi della Calabria - Department of Economics and Statistics

Maurizio La Rocca

Università degli Studi della Calabria

Tiziana La Rocca

Università degli Studi della Calabria

Francesco Trivieri

Università degli Studi della Calabria - Department of Economics and Statistics

Multiple version iconThere are 2 versions of this paper

Date Written: February 14, 2009

Abstract

The present study adds to the growing literature on the relationships between institutions and capital structure decisions. Specifically, it investigates capital structure determinants for small and medium sized firms in terms of institutional differences at the local level, taking into consideration local financial development, the effectiveness of the local enforcement system, and other firm-specific characteristics. The ability of the local financial market to efficiently provide funds is of particular interest to SMEs, as they cannot easily move to international more highly integrated financial markets. The main findings of the analysis suggest that capital structure choices are not only the result of firm-specific or industry-specific characteristics but are also affected by the institutional contexts in which firms operate. After controlling for debt inertia, firms' heterogeneity and endogeneity problems, leverage is found to be positively influenced by local financial development, and this influence appears stronger where the quality of the legal enforcement is higher.

Keywords: Capital structure, debt, local financial development, local enforcement system, SMEs

JEL Classification: G21, G30

Suggested Citation

Agostino, Mariarosaria and La Rocca, Maurizio and La Rocca, Tiziana and Trivieri, Francesco, Local Financial Development and SMEs Capital Structure: An Empirical Investigation (February 14, 2009). Available at SSRN: https://ssrn.com/abstract=1343136 or http://dx.doi.org/10.2139/ssrn.1343136

Mariarosaria Agostino

Università degli Studi della Calabria - Department of Economics and Statistics ( email )

via Ponte Bucci
Arcavacata di Rende, Cosenza 87036
Italy
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

Maurizio La Rocca (Contact Author)

Università degli Studi della Calabria ( email )

Ponte Bucci, Cubo 3C
Rende (Cosenza), Cosenza 87036
Italy

HOME PAGE: http://www.mauriziolarocca.it

Tiziana La Rocca

Università degli Studi della Calabria ( email )

87036 Arcavacata di Rende CS
Italy

Francesco Trivieri

Università degli Studi della Calabria - Department of Economics and Statistics ( email )

via Ponte Bucci
Arcavacata di Rende, Cosenza 87036
Italy

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