Capital Structure and Profitability: An Empirical Analysis of SMEs in the UK
Year: 2015
Type: preprint
Abstract: This study examines the relationship between capital structure and the profitability of nonfinancial SMEs in the UK for the period of 1998-2008. Using the Two Stage Least Squares, (2SLS) the results show a significant relationship with capital structure and profitability which is negatively related. The size of the firm appears a more important factor that determines the profitability in SMEs in the UK. There is consistent evidence for positive size- profitability relationship. The results of this study have shown that the capital structure of the firm has a significant influence on the profitability of SMEs in the UK. Especially, long-term debt to total assets ratio is negatively related with the profitability and this is an indication that SMEs are averse to use more equity because of the fear of losing the control.
Source: SSRN Electronic Journal
Author: D.K.Y. Abeywardhana
Institution: University of Kelaniya
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2336525762