Investigating the Impact of Firm Characteristics on Capital Structure of Quoted and Unquoted SMEs

Mostafa S. ELbekpashy, Khairy ELgiziry


This study aims to enhance the understanding of SMEs’ capital structure in Egypt. The study tests the impact of asset structure (tangibility), size, profitability, liquidity, growth, age, and ownership structure as independent variables on the leverage ratio. Three alternative variables are used as a proxy for leverage: total, long term, and short term leverage. The study further investigates the significance of the relationship between the economic sector as a control variable and the three leverage ratios. Multiple regression analysis is used to develop the explanatory models for two samples of SMEs. The first sample comprises of 28 listed and traded SMEs in Egypt. The second sample includes panel data of 95 non-quoted SMEs. The overall model recommends that all the independent and control variables significantly explain the capital structure decisions of SMEs in Egypt. The results of the analysis of the two samples show a high degree of similarity. The managerial ownership is found to be negatively correlated with short term leverage, while the block holding ownership is positively correlated with the total and the short term leverage. Moreover, the sector shows a significant relationship with the capital structure. The results of the study demonstrate that the financing behavior of SMEs in Egypt is consistent with the pecking order theory. Finally, the study introduces useful recommendations for policy makers and SMEs’ management in Egypt.

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Accounting and Finance Research
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