Capital Structure and Irish Tech SMEs

Abstract

This paper analyses the capital structure of 100 Irish technology oriented small companies and in particular looks at the impact financing options have on a variety of key topics. We examine key variables and their impact on the source of finance used by tech SMES The importance of internal sources, particularly retained earnings is found amongst older firms. A change from equity finance to debt occurs within tech SMEs over time. The relationship between the banking sector and tech firms has not improved over the past few years. Half of the tech firms were found to be profitable. Regression analysis finds a negative relationship between the use of incubators and accelerators with profitability. A positive relationship between tangible assets and internal finance exists, while firms with previous start-up experience have a positive affiliation with equity finance. The generation of revenue for tech SMEs is positively influenced by internal finance, while the use of debt is discovered to provide a negative impact.