What are the determining factors in the capital structure decisions of small and medium-sized firms in Cabinda, Angola?^*,**

Abstract

The objective of this study was to analyze the determining factors that explain the capital structure decisions of small and medium-sized enterprises (SMEs) in the province of Cabinda, Angola. In this study, debt maturity was also analyzed and, therefore, total indebtedness was broken down into short, medium, and long-term debt ratios. This study is motivated the poor number of studies on the determinants of the capital structure of SMEs in developing countries, more specifically in Cabinda, Angola. This research is relevant for Corporate Finance, particularly regarding the capital structure of SMEs located in a developing country like Angola. Also, it corroborates previous studies on the applicability of the principles of the pecking-order theory to SMEs in developed countries. This research present contributions to Corporate Finance, as it identifies the determinants of the capital structure of SMEs in a developing country - considering the debt maturity -, through the analysis of total debt ratios-, short-, medium- and long-term debt. Based on a sample of 73 SMEs for the period between 2011 and 2016, we used panel data models (pooled OLS, fixed and random effects). The results of this study show that tangibility, age, liquidity, and non-debt tax shield are determining factors in the decisions of the capital structure of SMEs in the province of Cabinda, Angola. Furthermore, they suggest that these firms follow the principles of pecking-order theory in capital structure decisions. The research contributes to increase studies in Corporate Finance, particularly concerning the determinants of the capital structure of SMEs located in a developing country.

Keywords:
Angola - Cabinda; capital structure decisions; panel data models; SMEs