, Volume 4, Issue 2, pp 155–173 | Cite as

Capital structure of small companies in the Spanish footwear sector: relevant factors

  • Miguel A. Acedo-RamírezEmail author
  • Juan C. Ayala-Calvo
  • José E. Rodríguez-Osés
Open Access
Original Article


This study suggests the preponderance of the pecking order theory over the trade-off theory when there are greater problems of information asymmetry, which is more usual in small-sized firms. The results show that debt level has an inverse relationship with non-debt tax shield and direct relationship with investment in fixed assets, supporting the trade-off theory. However, the positive coefficient of growth opportunities and negative coefficient of debt cost, age and cash flows is consistent with the prediction of the pecking order theory. Results taken from a sample of small Spanish companies in the footwear sector during the period 1998–2006, revealed that in absence of asymmetric information, firms with positive cash flows will prefer debt because (a) they want to maintain their optimal capital structure; (b) they have greater needs to shield this cash flow from corporate tax and (c) they are concerned about the problem of over-investments, which means that they issue debt in order to discipline the firm’s managers. The relationship between growth opportunities and debt level was positive. This is not surprising due to the need to finance these investment opportunities with debt, because rapidly growing firms are likely to have insufficient earnings to finance internally all of their growth. Furthermore, the low debt level of companies in the Spanish footwear sector also helps to explain this relationship due to the importance of R&D investments for this industry, which lenders value as strategic investments. Finally, small businesses face high transaction costs derived from typical agency problems and financial restriction on capital markets. Such high transaction costs justify the gap between the target and the current debt level and are responsible for the slow approach of their debt level to the target ratio.


Capital structure Non-debt tax shield Growth opportunities Cash flow 

JEL Classification




The authors would like to thank the University of La Rioja (API07/A19) for its financial support.


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This article is published under license to BioMed Central Ltd. Open Access This article is distributed under the terms of the Creative Commons Attribution License which permits any use, distribution, and reproduction in any medium, provided the original author(s) and the source are credited.

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Authors and Affiliations

  • Miguel A. Acedo-Ramírez
    • 1
    Email author
  • Juan C. Ayala-Calvo
    • 1
  • José E. Rodríguez-Osés
    • 1
  1. 1.Dpto. Economía y EmpresaUniversidad de La RiojaLogroño, La RiojaSpain

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