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Título
How does Financial Distress Affect Small Firms’ Financial Structure?
Autor(es)
Materia
Financial distress
Financial structure
Adjustment model
Panel data
Clasificación UNESCO
5311 Organización y Dirección de Empresas
5311.02 Gestión Financiera
Fecha de publicación
2006
Citación
Pindado, Julio., Rodrigues, Luis., De la Torre, Chabela. (2006). How does Financial Distress Affect Small Firms’ Financial Structure?. Small Business Economics, 26(4) , pp. 337–391. doi.org/10.1007/s11187-005-4845-8
Resumen
[EN] This paper provides new evidence on the financial structure of small firms by emphasizing the role played by financial distress. We specify a model of debt adjustments that allows us to investigate the specific nature of the adjustment process towards target debt levels in small firms, which is then extended to account for the effect of financial distress on financial structure decisions. Our models were estimated by the Generalized Method of Moments on a data panel of small Portuguese firms during a period of recession, in which a substantial proportion of the companies analyzed faced a financial distress situation. We find that small firms do adjust their debt ratios towards target levels, the speed of adjustment being faster in the shorter term. Our results also indicate that there are major differences in the determinants of long-term and short-term debt, highlighting the role played by debt maturity in explaining a firm’s financial structure. Finally, random behavior is observed in financially distressed firms, who seem to be disoriented when making their financial structure decisions.
URI
ISSN
0921-898X
DOI
10.1007/s11187-005-4845-8
Versión del editor
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