Determinants of small firm debt ratios: an analysis of retail panel data

In this paper, the relevance of some debt ratio determinants from the recent theory of finance is empirically investigated in a small business sector. The data used in this study consist of average financial data of 27 shoptypes in 20 different years, covering a period of 24 years. The panel character of the data facilitates the use of analytical techniques aimed at reducing or avoiding the biasing effect of omitted variables on the outcomes. The main conclusion is, that the theoretical determinants appear indeed to be relevant for the small business sector investigated here, but the influences encountered in the analyses are far less straightforward than the hypothesized effects in the theory. Influences on total debt are frequently found to be the net effects of opposite influences on long and short term debt and some variables show large time and industry specific effects. Further, distinct patterns in the time specific effects were found

Analyzing Risk and Performance Using the Multi-Factor Concept

In this paper, we present a new model to analyze the risk and the expected level of firm performance. This model is based on the multi-factor approach to risk, in which unexpected performance is explained through sensitivities to unexpected changes of risk factors. Instead of using the multi-factor approach for the analysis of security portfolios, it is used to analyze performance measures of firms. In this paper the multi-factor approach is not only used to analyze risk, but also to analyze the expected level of performance. Furthermore, it is analyzed how instruments, as for instance projects, can be used to change the risk and the expected level of performance. An illustrative application in the field of finance is presented, although the model can also be applied in other areas