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Capital structure determinants and adjustment speed: An empirical analysis of Dutch SMEs

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  • Remco Mocking
  • Joep Steegmans

Abstract

This paper presents empirical evidence of both the determinants and the adjustment speed of capital structure of small and medium-sized enterprises (SMEs) in the Netherlands. Using an administrative panel data set of the period 2000-2014, containing 153,923 firms, we estimate a partial adjustment model through system GMM. The results show that firm size and profitability reduce debt to assets ratios, while tangible assets, depreciation, and marginal taxes increase them. Growth of assets is either statistically or economically insignificant. The estimated adjustment speed parameter is 0.748, indicating that the adjustment process is particularly slow in the Netherlands.

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  • Remco Mocking & Joep Steegmans, 2017. "Capital structure determinants and adjustment speed: An empirical analysis of Dutch SMEs," CPB Discussion Paper 357, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:357
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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