Abstract
Abstract The objective of this study was to analyze the determining factors that explain the capital structure decisions of small and medium-sized enterprises (SMEs) in the province of Cabinda, Angola. In this study, debt maturity was also analyzed and, therefore, total indebtedness was broken down into short, medium, and long-term debt ratios. This study is motivated the poor number of studies on the determinants of the capital structure of SMEs in developing countries, more specifically in Cabinda, Angola. This research is relevant for Corporate Finance, particularly regarding the capital structure of SMEs located in a developing country like Angola. Also, it corroborates previous studies on the applicability of the principles of the pecking-order theory to SMEs in developed countries. This research present contributions to Corporate Finance, as it identifies the determinants of the capital structure of SMEs in a developing country - considering the debt maturity -, through the analysis of total debt ratios-, short-, medium- and long-term debt. Based on a sample of 73 SMEs for the period between 2011 and 2016, we used panel data models (pooled OLS, fixed and random effects). The results of this study show that tangibility, age, liquidity, and non-debt tax shield are determining factors in the decisions of the capital structure of SMEs in the province of Cabinda, Angola. Furthermore, they suggest that these firms follow the principles of pecking-order theory in capital structure decisions. The research contributes to increase studies in Corporate Finance, particularly concerning the determinants of the capital structure of SMEs located in a developing country.
Highlights
João Lussuamo & Zélia SerrasqueiroThe studies on the capital structure started with Durand (1952) and, later, Modigliani and Miller (1958, 1963)
This paper aims to analyze the determinants of the capital structure decisions of non-financial small and medium-sized enterprises (SMEs) located in the Sub-Saharan Africa region, in the province of Cabinda, Angola, for the period between 2011-2016, by applying panel data models
The results suggest that SMEs in the province of Cabinda closely follow the principles of the pecking order theory
Summary
João Lussuamo & Zélia SerrasqueiroThe studies on the capital structure started with Durand (1952) and, later, Modigliani and Miller (1958, 1963). Most small and medium-sized enterprises (SMEs) are absent from the stock market, as they do not meet the requirements, and face difficulties in accessing external financing, especially long-term debt (Sardo & Serrasqueiro, 2017). SMEs are more exposed to asymmetric information problems than large firms, due to the lack of financial information disclosure, and the ownership and management being concentrated in a small number of individuals (Rao & Kumar, 2018) This situation implies that creditors will require guarantees from SMEs in return for the granting of medium and long-term debt (Michaelas, Chittenden, & Poutziouris, 1999; Rao & Kumar, 2018). These firms are dependent on short-term debt as a source of external financing (Heyman, Deloof, & Ooghe, 2008; Scherr & Hulburt, 2001)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
