Determinants of capital structure in Russian small and medium manufacturing enterprises

Keywords: financial leverage, capital structure, small and medium enterprises, own funds, borrowed funds


Research background: Capital structure decisions are very important for any kind of business, but they have a special meaning for small and medium enterprises (SMEs), because their strategic miscalculations can lead to a crisis or even bankruptcy much faster due to the limited scope of their activities.

Purpose of the article: The research investigates the basic theories of capital structure and their applicability to SMEs considering the specificities of their functioning. The study aims to identify the determinants of SMEs own and borrowed funds ratio and the main driving forces of their financial decisions. The paper identifies the reasons why SMEs have difficulties in attracting borrowed funds and problems with collateral provision. The paper also presents the dynamics of the capital structure and the composition of the borrowed funds in Russian SMEs.

Methods: The research is based on the panel data of Russian manufacturing SMEs in the period of years 2010–2018. The panel data is unbalanced to avoid a survival bias. The financial ratios selected as variables was calculated using consolidated financial statements published by Russian Federal State Statistics Service. The statistical relations between the indicators were performed by a fixed effects regression with a dummy.

Findings & Value added: The results of the research identified that current liquidity and asset structure have the statistically significant negative impact on the financial leverage in Russian manufacturing SMEs. The determinants of capital structure in Russian SMEs have not been investigated before, so the presented empirical findings are novel and can be used as a base for further research and analysis.


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How to Cite
Panova, E. (2020). Determinants of capital structure in Russian small and medium manufacturing enterprises. Equilibrium. Quarterly Journal of Economics and Economic Policy, 15(2), 361-375.