The crisis effect on the capital structure of portuguese SME

Abstract

This paper aims to identify the main determinants of leverage on Portuguese Small and Medium Enterprises (SME), as well as their behaviour to financial prosperity and recession. Applying the panel data methodology, we analyse a sample of 1,444 SME for the period between 2004 and 2012. The results show a positive relationship between tangibility of assets, the firms’ size, the growth rate of the asset and the business risk, and the level of indebtedness of the company. We find also a negative relationship between profitability, the tax advantages non-resultant from debt and the firms’ cycle of life, and the indebtedness level. Finally, the results show that the financial crisis influences negatively the levels of indebtedness of Portuguese companies, a result of rationing and enhancement of bank credit.