August 15, 2017

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

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.


Remco Mocking
Joep Steegmans