How do corporate characteristics affect capital structure decisions of French SMEs?

Abstract

PurposeThe purpose of this paper is to study the influence of various corporate characteristics on the capital structure of French small and medium‐sized enterprises (SMEs).Design/methodology/approachOLS fixed‐effect regressions are used to estimate the influence of SME corporate characteristics on three capital structure measures, namely total, long‐term and short‐term debt.FindingsThe findings suggest that size, profitability, growth and tangibility of assets influence, in a significant way, the capital structure of French SMEs. Furthermore, when decomposing the sample into two groups: small (1) and medium‐sized (2) firms, the findings indicate that corporate characteristics affect the capital structure of these two subsamples in the same direction, but with different amplitudes.Originality/valueThe evidence presented and discussed in this paper extends the existing literature. From an academic perspective, the methodological approach and the empirical results provide a level of analysis unmatched by the previous research on French firms. Moreover, the findings can add to the knowledge and the understanding of SME corporate managers. They can provide useful information to assist them in their decision making regarding the capital structure of their firms at a time when difficulties of SME financing are more and more evoked in the French context.