Title: Information asymmetry and capital structure: an empirical study of micro firms in Sweden

Authors: Darush Yazdanfar

Addresses: Department of Social Sciences, Mid Sweden University, Regementsgatan 25-27, Östersund 831 25, Sweden

Abstract: This study empirically examines the capital structure determinants of Swedish micro companies by testing hypotheses based on information asymmetry theory. The study sample contains 20,270 micro firms for which complete 2007 to 2008 financial information is available, giving a total of 182,430 observations. The empirical results indicate that six explanatory variables, that is, lagged long-term debt, size, age, profitability, tangibility, and industry affiliation, are related to capital structure to various extents. The results suggest that information asymmetry theory is relevant in explaining the financial behaviour of micro firms in Sweden. These findings can help SMEs to improve their awareness of financial management and to use resources more effectively.

Keywords: capital structure; SME finance; information asymmetry; pecking order; micro-enterprises; micro-businesses; micro-firms; Sweden; micro-companies; explanatory variables; lagged long-term debt; company size; company age; profitability; tangibility; industry affiliation; financial behaviour; financial management; resource usage; small and medium-sized enterprises; SMEs; entrepreneurs; entrepreneurship research; Europe.

DOI: 10.1504/IJESB.2012.049579

International Journal of Entrepreneurship and Small Business, 2012 Vol.17 No.3, pp.304 - 318

Available online: 09 Oct 2012 *

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