Abstract
This paper shows how the financial behaviour of small and medium sized companies is influenced by size and business sector. This idea underlies two research approaches to capital structure: (i) credit rationing, and (ii) the pecking order theory. Both approaches are based on asymmetric information and have been widely developed over the past two decades. An analysis has been carried out on 1000 Valencian companies that were randomly selected from the state company registry. These companies were divided by size before analysis. As an innovation, the investigation implements a multivariate MANOVA model that takes into account two key variables in the financing of small and medium firms. Our results show that size influences company self-financing strategies, and that business sector influences short-term financial policy.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Ang, J. S., 1991, ‘Small Business Uniqueness and the Theory of Financial Management’, Journal of Small Business Finance 1(3), 1–13.
Ang, J. S., 1992, ‘On the Theory of Finance for Privately Held Firms’, Journal of Small Business Finance 1(3), 185–203.
Boedo, L. and A. R. Calvo, 1997, ‘Un modelo de síntesis de los factores que determinan la estructura de capital óptima de las PYMES’, Revista Europea de Dirección y Economía de la Empresa 6(1), 107–124.
Brealey, R. and S. Myers, 1994, Fundamentos de Financiación Empresarial, McGraw Hill, Madrid, (4th ed).
Calomiris, C. and R. G. Hubbard, 1990, ‘Firm Heterogeneity, Internal Finance and Credit Rationing’, The Economic Journal 100(399), 90–104.
Chittenden, F., G. Hall and P. Hutchinson, 1996, ‘Small Firm Growth, Access to Capital Markets and Financial Structure: Review of Issues and an Empirical Investigation’, Small Business Economics 8, 59–67.
Cosh, A. D. and A. Hughes, 1994, ‘Size, Financial Structure and Profitability’, in A. Hughes and D. J. Storey (eds.), Finance and the Small Firm, Routledge, London.
Estrada, A. and J. Vallés, 1998, ‘Investment and Financial Structure in Spanish Manufacturing Firms’, Investigaciones Económicas 22(3), 337–360.
Fazzari, S. M. and M. J. Athey, 1987, ‘Asymmetric Information, Financing Constraints, and Investment’, The Review of Economics and Statistics, 481–487.
Fazzari, S. M., R. Hubbard and B. C. Petersen, 1988, ‘Financing Constraints and Corporate Investment’, Brookings Papers on Economic Activity 1, 141–206.
Gibson, B., 1992, ‘Financial Information for Decision-Making: An Alternative Small Firm Perspective’, Journal of Small Business Finance 1(3), 221–232.
Hall, G. and P. Hutchinson, 1993, ‘A Profit Analysis of the Changes in the Financial Characteristics of Newly Quoted Small Firms, 1970-73 y 1980-83’, Small Business Economics 5, 207–214.
Hamilton, R. T. and M. A. Fox, 1998, ‘The Financing Preferences of Small Firm Owners’, International Journal of Entrepreneurial Behaviour & Research 4(3), 239–248.
Harris, M. and A. Raviv, 1991, ‘The Theory of Capital Structure’, Journal of Finance 46(1), 297–355.
Hernando, I. and J. Vallés, 1992, ‘Inversión y restricciones financieras: evidencia en las empresas manufactureras españolas’, Moneda y Crédito 195, 185–222.
Holmes, S. and P. Kent, 1991, ‘An Empirical Analysis of the Financial Structure of Small and Large Australian Manufacturing Enterprises’, Journal of Small Business Finance 1(2), 141–154.
Instituto de Estudios Fiscales, 1996, Las empresas españolas en las fuentes tributarias, 1993. Ministerio de Economía y Hacienda, Madrid.
Jordan, J., J. Lowe and P. Taylor, 1998, ‘Strategy and Financial Policy in U.K. Small Firms’, Journal of Business Finance & Accounting 25(1), 1–27.
López-Gracia, J., V. Riaño and M. Romero, 1999, ‘Restricciones financieras y crecimiento: el caso de la pequeña y mediana empresa’, Revista Española de Financiación y Contabilidad 28(99), 349–382.
Maroto, J. A.,1996, ‘Estructura financiera y crecimiento de las pymes’, Economía Industrial 310(4), 29–40.
Mato, G., 1989, ‘Inversión, coste del capital y estructura financiera: un estudio empírico’, Moneda y Crédito, 2nd Epoca 188, 177–201.
Modigliani, F. and M. H. Miller, 1958, ‘The Cost of Capital, Corporation Finance and the Theory of Investment’, American Economic Review 48, 261–297.
Myers, S. C., 1984, ‘The Capital Structure Puzzle’, Journal of Finance 34(3), 575–592.
Myers, S. C. and N. S. Majluf, 1984, ‘Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have’, Journal of Financial Economics 13, 187–221.
Ocaña, C., V. Salas and J. Vallés, 1994, ‘Un análisis empírico de la financiación de la pequeña y mediana empresa manufacturera española: 1983-1989’, Moneda y Crédito 199, 57–96.
Reid, G., 1993, Small Business Enterprise: An Economic Analysis, Routledge, London.
Robson, G., C. Gallagher and M. Daly, 1994, ‘Diversification Strategy and Practice in Small Firms’, International Journal of Small Business Research 11(2), 37–53.
Scherr et al., 1990, ‘Financing the Small Firm Startup: Determinants of Debt Use’, Proceedings Second Annual Small Firm Finance Research Symposium.
Stiglitz, J. E. and A. Weiss, 1981, ‘Credit Rationing in Markets with Imperfect Information’, American Economic Review 73, 393–409.
Storey, D., 1994, Understanding the Small Firm Sector, Routledge, London.
Uriel, E., 1995, Análisis de Datos. Series temporales y análisis multivariante. Editorial AC. Colección Plan Nuevo.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Lopez-Gracia, J., Aybar-Arias, C. An Empirical Approach to the Financial Behaviour of Small and Medium Sized Companies. Small Business Economics 14, 55–63 (2000). https://doi.org/10.1023/A:1008139518709
Issue Date:
DOI: https://doi.org/10.1023/A:1008139518709