Culture and Capital Structure in Small and Medium Sized Firms

34 Pages Posted: 6 Dec 2012 Last revised: 11 Jul 2015

See all articles by Colm Kearney

Colm Kearney

Monash University - Monash Business School

Ciaran Mac an Bhaird

Dublin City University

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; Ho Chi Minh City University of Economics and Finance

Date Written: December 5, 2012

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.

Keywords: capital structure, SME, Hofstede’s cultural values, Europe, pecking order

JEL Classification: g32

Suggested Citation

Kearney, Colm and Mac an Bhaird, Ciarán and Lucey, Brian M., Culture and Capital Structure in Small and Medium Sized Firms (December 5, 2012). Available at SSRN: https://ssrn.com/abstract=2185284 or http://dx.doi.org/10.2139/ssrn.2185284

Colm Kearney

Monash University - Monash Business School ( email )

Sir John Monash Drive
Caulfield
Melbourne, Victoria 3168
Australia
+353399031021 (Phone)

Ciarán Mac an Bhaird

Dublin City University ( email )

Ireland 9
Dublin 9, leinster 9
Ireland

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

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