Firm size and capital structure: evidence using dynamic panel data
Year: 2011
Type: article
Abstract: This article suggests that the validity of the Trade-Off Theory (TOT) and Pecking-Order Theory (POT) to explain financing decisions varies among small, medium-sized and large firms. Using dynamic panel data tests on a sample of 3439 Spanish firms over the period 1995–2003, results are partially consistent with both explanations but suggest a greater validity of pecking-order predictions for small firms. In small firms, the negative influence of profitability and the positive influence of investment opportunities and of intangible assets on firm debt predicted by the POT are heightened. However, no differences are observed between small and large firms in their speed of adjustment to the target leverage as suggested by the TOT.
Source: Applied Economics
Authors: Víctor M. González, Francisco González
Institution: Universidad de Oviedo
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2117277452