Determinants of the Capital Structures of European SMEs

The aim of this paper is to examine the degree to which the determinants of SMEs' capital structures differ between European countries. The study is based on data for four thousand SMEs, five hundred from each of eight European countries. Regressions were run using short-term and long-term debt as dependent variables and profitability, growth, asset structure, size and age as independent variables. A key feature of this paper is the use of restricted and unrestricted regressions to isolate the country-effect from the firm-specific-effect. The results show that variations are likely to be due to country differences as well as firm-specific ones

Drivers of external equity funding in small high-tech ventures

Financing is one of the major issues affecting the success and survival of entrepreneurial ventures. Theory suggests that due to information asymmetry between owners and investors or lenders, there is a “pecking order” of financing preferences, whereby retained earnings is preferred to debt, and outside equity is seen as a last resort. In high-tech ventures, however, outside equity financing is more commonly used than debt, but the reasons for this are not yet well-understood. We develop hypotheses to examine this theory-practice gap, which we test using a sample of private high-tech firms of various ages. We find that the greater the owner’s perception of information asymmetries in debt markets, the larger the proportion of external equity in the firm’s capital structure. As our sample firms age, their use of external equity relative to other sources of finance diminishes. We also find a positive relationship between the use of external equity and the firm’s initial investment. Lastly, we show that the greater the perception amongst founders that obtaining external equity sends a positive signal, the greater its use. We discuss the implications of these findings and offer suggestion for future research and practice

Understanding the Impact of Entrepreneurial Orientation on Smes’ Performance. the Role of the Financing Structure

Based on a sample of 300 small and medium enterprises (SMEs) located in the Province of Udine (north East of Italy) and the Kärtner Region (South of Austria) we perform an analysis of the impact of Entrepreneurial Orientation (EO) on SMEs’ subjective performances. We develop a model in which EO dimensions are moderated by the role of financial leverage The present work is part of a research project on an interregional co-operation programme Italy-Austria (INTERREG IV) financed by the European Regional Development Fund whose program areas include the Province of Udine and the Kärtner Region. Subjective performances has been widely investigated in academic literature where various streams of research have been developed. A prominent field of research focuses on the constructs of EO orientation and their ability to prompt performances through innovative attitude, risk taking behaviour, aggressiveness, autonomy and competitive energy. Another established field of research focuses on the impact of financial structure (i.e. leverage) on performances, although with ambiguous results.. We find support to the hypothesis that competitive energy might have a significant and positive impact in driving performance, which has obvious implications for managers and theoreticians. We also find that leverage might have a significant moderating role through interactions with EO dimensions