Determinants of SME´s Financing and Capital Structure: New Evidence of the Portuguese Market


  • Carlos Mota, Adalmiro Pereira, Diogo Moutinho


This paper studies the financial practices of SMEs in Portugal, their preferences in financing and capital structure´sdecisions. It analysesrelations between debt levels and the determinants that explain it, using indicators based on book values. The methodology consists in the estimation of the multiple linear regression model using the least squares method for fixed effects and the generalized moment estimator (GMM). The sample consists of annual data from two panels - “PME Líder” and “PME Excelência” - representative of the various sectors of activity, in a four-year time observation (2013 to 2016).

Our study shows that SMEs tend to use short-term debt. Moreover, the evidence confirmsthat debt patterns can be explained by specific corporate characteristics. Profitability, liquidity  and tangibility are relevant determinants of SME's capital structure. Other factors that have shown significant statistical associations with debt options are company´s size and growth. Age was weakly associated with the total indebtedness of the SMEs studied. Cross-date with the main sectors of economic activity do not identify significant statistically differences in debt levels across sectors. Similarly, no significant differences between SMEs wereobserved in the three main Portuguese regions.