José López-Gracia

An Empirical Approach to the Financial Behaviour of Small and Medium Sized Companies

This paper shows how the financial behaviour of small and medium sized companies is influenced by size and business sector. This idea underlies two research approaches to capital structure: (i) credit rationing, and (ii) the pecking order theory. Both approaches are based on asymmetric information and have been widely developed over the past two decades. An analysis has been carried out on 1000 Valencian companies that were randomly selected from the state company registry. These companies were divided by size before analysis. As an innovation, the investigation implements a multivariate MANOVA model that takes into account two key variables in the financing of small and medium firms. Our results show that size influences company self-financing strategies, and that business sector influences short-term financial policy.

On the Relevance of Agency Conflicts in SME Debt Maturity Structure

Previous theoretical research asserts that an optimal policy of debt maturity structure mitigates the various agency conflicts that arise through debt contracts. We test this hypothesis on Small and Medium‐Sized Enterprises (), which are very sensitive to agency problems. Such problems mainly arise between owners and debt providers, due to recording high growth and having few fixed assets and informational asymmetry. We provide evidence on the relevant effect of underinvestment, asset substitution, and overinvestment problems on debt structure. Results appear to be robust to both the endogeneity problem of explanatory variables and the censored dependent variable.

Financial constraints and cash–cash flow sensitivity

This article explores the cash–cash flow relationship by comparing financially constrained and financially unconstrained companies. Unlike previous research, we test the sensitivity of cash to cash flow by considering unlisted firms as constrained and listed firms as unconstrained. Our empirical evidence is based on findings from Spanish firms and is consistent with the core rationale that unlisted firms face more difficulties than their listed counterparts when looking for funding from external markets. As a result, unlisted firms tend to hoard significant amounts of cash out of the generated cash flow, while listed firms do not. Our findings are robust to a number of additional empirical tests.

New Evidence of the Tax Effect on SME Optimum Debt Maturity Structure

This paper analyzes the influence the tax effect has on optimum SME debt maturity structure. Unlike previous research, this study builds a dynamic adjustment model which endogenizes optimum structure and assumes the existence of adjustment costs. The model is then estimated by applying a system-GMM regression to a complete data panel (12,250 firms) covering the period dating from 1997 to 2004. SMEs adjust to their target at a speed of 35%, which is the equivalent of employing around 20 months to cover only half of the existing gap. This rate is lower than those obtained in other similar papers studying large companies with publicly tradeable equity.