The capital structure dynamics of European listed SMEs

Abstract

This article investigates the capital structure dynamics of European SMEs by assessing the impact of firm-specific, institutional, and macroeconomic factors over the period 2005–2015, including the European Sovereign Debt Crisis (ESDC). In this setup, we perform a dynamic panel data analysis, along with several model specifications and robustness tests on listed SMEs of EU-28, dividing them into firm categories (micro, small, and medium) and country groups (core, periphery, high technology, and new EU member countries). We find that the effect of capital structure determinants do not differ significantly across size and country groups. The results suggest that profitability, asset structure, and size have been the driving forces of listed SME’s leverage, regardless of the size of the companies and the country group. At a macroeconomic and institutional level, taxation is the most significant variable for all the subgroups. Finally, the ESDC seems to increase the leverage of the listed SMEs in the periphery and the new member states countries, leaving the core countries practically unaffected.

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