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Capital structure determinants of small and medium-sized enterprises: evidence from Central and Eastern Europe

Journal of small business and enterprise development, 2021-03, Vol.28 (2), p.277-297 [Peer Reviewed Journal]

Leszek Czerwonka and Jacek Jaworski ;Leszek Czerwonka and Jacek Jaworski. This work is published under https://creativecommons.org/licenses/by-nc/3.0/legalcode (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 1462-6004 ;EISSN: 1758-7840 ;DOI: 10.1108/JSBED-09-2020-0326

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  • Title:
    Capital structure determinants of small and medium-sized enterprises: evidence from Central and Eastern Europe
  • Author: Czerwonka, Leszek ; Jaworski, Jacek
  • Subjects: Bankruptcy ; Capital structure ; Central banks ; Costs ; Debt financing ; Economic growth ; Literature reviews ; Small & medium sized enterprises-SME
  • Is Part Of: Journal of small business and enterprise development, 2021-03, Vol.28 (2), p.277-297
  • Description: PurposeThe main aim of the paper is to examine the small and medium-sized enterprises’ (SMEs) capital structure determinants in Central and Eastern Europe (CEE) (Poland, Czechia, Slovakia, Hungary, Bulgaria and Romania).Design/methodology/approachThe authors used panel models to analyze financial data of 15,253 companies operating in the years 2014–2017.FindingsThe authors confirmed the dominant role of firm-specific factors. Industry and country variables explain only 4% of debt variability of the surveyed companies. The direction of influence of the diagnosed firm-specific factors is consistent with the pecking order theory. About one-fourth of SMEs in CEE hold a stock of debt capacity. It negatively affects the share of debt in the capital. The authors did not confirm the influence of the systematic industry business risk.Research limitations/implicationsThe limitations of the study are (1) the inclusion of only six CEE countries in the sample; (2) the exclusion of microenterprises from the sample; (3) the capital structure relationships are observed following the applications of static panel; (4) the endogeneity issue has not been addressed in the model.Practical implicationsThis study shows that business-friendly institutional environment is an important factor influencing the indebtedness of companies. It increases the leverage and, consequently, the return on equity, especially in CEE countries.Originality/valueSME analyses in CEE countries are not as frequent as for other regions. Despite the classical determinants of the SMEs' capital structure, the authors have included debt capacity and systematic industry business risk in this study.
  • Publisher: Bradford: Emerald Publishing Limited
  • Language: English
  • Identifier: ISSN: 1462-6004
    EISSN: 1758-7840
    DOI: 10.1108/JSBED-09-2020-0326
  • Source: ProQuest Central
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