THE CAPITAL STRUCTURE OF PORTUGUESE SMEs: EMPIRICAL EVIDENCE USING DYNAMIC PANEL DATA

Using various dynamic panel estimators, this study shows that the capital structure decisions of small and medium-sized Portuguese companies have a dynamic nature. The results obtained from application of various dynamic panel estimators to a sample of 640 non-financial small and medium-sized Portuguese companies in the period 1999-2005 suggest that companies depend greatly on self-financing, in the insufficiency of which they resort to debt to cover periodic insufficiencies of liquidity, and also to finance growth. The results also suggest that the transaction costs borne by small and medium-sized Portuguese companies appear to be less than the costs of financial imbalance, since adjustments to their capital structure cannot be considered negligible and are more relevant concerning short-term debt than adjustments we find to long-term debt.