Capital structure, debt maturity, and financial crisis: empirical evidence from SMEs
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Capital structure, debt maturity, and financial crisis: empirical evidence from SMEs Antonio D’Amato
Accepted: 18 March 2019 # Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract Based on a unique dataset of Italian smalland medium-sized enterprises (SMEs) over the 2006– 2016 period, we investigate how the recent global financial crisis impacted SMEs’ capital structure decisions and their determinants. Our results show that credit supply shocks negatively impacted Italian SMEs’ leverage. During and after the crisis, Italian SMEs significantly decreased their leverage, particularly their short-term debt exposure, relative to the pre-crisis period. As a result, the short-term debt channel is more sensitive to credit conditions than the long-term debt channel. Interestingly, we also show that trade credit does not compensate for the reduction in bank credit. Finally, our findings reveal that riskier and more profitable firms reduced their leverage more during the crisis than during the pre-crisis period. Implications for firms and policymakers are discussed.
Keywords Global financial crisis . SMEs . Capital structure . Debt maturity
JEL codes G01 . G32 . G33 . L26
A. D’Amato (*) Department of Economics and Statistics, University of Salerno, Via Papa Giovanni Paolo II, 132, 84084 Fisciano, SA, Italy e-mail: [email protected]
1 Introduction The recent global financial crisis was the most severe economic crisis since the 1929 Great Depression. The crisis began in the USA in 2007 with the bankruptcy of Lehman Brothers, and its effects led to negative consequences worldwide, severely impacting the real economy and affecting businesses and consumers (Kahle and Stulz 2013; Moshirian 2011). Following these events, the literature on the causes and consequences of the 2008 financial crisis grew rapidly (Ivashina and Scharfstein 2010; King and Wen 2011; Popov and Ongena 2011). In particular, there is considerable evidence that the disruption of markets and financial institutions following the crisis has significantly affected the conditions and availability of bank credit (Campello et al. 2010). Despite growing interest in the effects of the financial crisis on the real economy, particularly on businesses, analyses of the effects of the financial crisis on firms’ behavior, specifically on financial decisions (especially with reference to firms’ capital structure), remain limited and are focused primarily on large, listed companies (Harrison and Wisnu Widjaja 2014; Zeitun et al. 2017). Furthermore, little attention has been paid to the effects of the financial crisis on the financial behavior of small- and medium-sized enterprises (SMEs) (Daskalakis et al. 2017). Although in recent years, scholars’ interest has also turned to the analysis of SMEs’ capital structure (Hall et al. 2004; López-Gracia and Sogorb-Mira 2008; Palacín-Sánchez et al. 2013; Sogorb-Mira 2005), this topic deserves considerably
A. D’Amato
more scholarly attention (Kumar et al. 2017). SMEs represent almost all enterprises global
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