The objective of this article is to analyse how regional financial and economic differences
influence the capital structure decisions of small and medium-sized enterprises (SMEs). Specifically,
this paper considers the regional financial and economic differences in four ways: the development
of the financial sector in the region, bank market concentration, the financial cost of obtaining funds,
and regional economic development. For this purpose, we used unbalanced panel data from 26,504
SMEs across the 20 Italian regions and over the period from 2004 to 2010. This work is completed
with an analysis of a no-crisis (2004–2007) and a crisis period (2008–2010). The results show that
the regional differences in the degree of financial sector development, banking concentration, and
local economic situations have a significant impact on the leverage level of SMEs, while the cost of
obtaining funds is only relevant during a period of economic stability. These results suggest that
insights can be derived from data disaggregation at the regional level inside the same country. These
regional divergences in the capital structure of SMEs could influence regional economic resilience
