Small Firm Capital Structure and the Syndicated Loan Market

Journal of Financial Services Research, April 2011, Volume 39, Issue 1–2, pp 55–70

28 Pages Posted: 14 Apr 2019

See all articles by Pankaj K. Maskara

Pankaj K. Maskara

Eastern Kentucky University - Accounting, Finance, & Information Systems; Nova Southeastern University

Donald J. Mullineaux

University of Kentucky - Gatton College of Business and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 9, 2009

Abstract

We show that small firms using syndicated loans for their mid- and long-term financial needs have significantly higher leverage than firms that do not borrow in this market. This difference cannot be attributed to firm characteristics like the availability of growth opportunities, asset tangibility, R&D spending, profitability and net sales that are known to influence capital structure. We also find that the capital structure of other firms that borrow in the syndicated loan market is not different from those that do not. We show that already highly leveraged small firms are more likely to borrow in the syndicated loan market than other firms. The higher debt in the capital structure of small firms that rely on syndicated loans consequently can be attributed to the availability of capital rather than demand for capital, as shown more generally by Faulkender and Petersen (2006).

Keywords: Capital structure, Syndicated loans, Leverage

JEL Classification: G32, G21

Suggested Citation

Maskara, Pankaj K. and Mullineaux, Donald J., Small Firm Capital Structure and the Syndicated Loan Market (July 9, 2009). Journal of Financial Services Research, April 2011, Volume 39, Issue 1–2, pp 55–70 , Available at SSRN: https://ssrn.com/abstract=3353554

Pankaj K. Maskara (Contact Author)

Eastern Kentucky University - Accounting, Finance, & Information Systems ( email )

United States

Nova Southeastern University ( email )

3301 College Avenue
Ft. Lauderdale, FL 33314
United States

Donald J. Mullineaux

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
859-257-2890 (Phone)
859-257-9688 (Fax)

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