Determinants of the capital structure of Dutch SMEs

This study explores the important firm-level factors determining the capital structure of Dutch SMEs. Data, containing financial statements of Dutch SMEs in the period 2010-2012, was collected from the database Reach. I analyzed 5235 firm-year observations. Using the Ordinary Least Squares regression analysis factors of the trade-off theory and the pecking order theory have been tested. The empirical results show that the capital structure of Dutch SMEs is mainly influenced by the firm-level factors ‘Non-debt tax shields’, ‘Profitability’ and ‘Liquidity’ and that the pecking order theory has the most explanatory power for the capital structure of Dutch SMEs.