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

33 Pages Posted: 21 Mar 2009

See all articles by José López-Gracia

José López-Gracia

University of Valencia - Department of Accounting

Reyes Mestre-Barberá

University of Valencia - Department of Accounting

Date Written: March, 20 2009

Abstract

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.

Keywords: Small and Medium Sized enterprise, debt maturity structure, dynamic model, tax effect, System GMM

JEL Classification: C33, G32

Suggested Citation

Lopez-Gracia, Jose and Mestre-Barberá, Reyes, New Evidence of the Tax Effect on SME Optimum Debt Maturity Structure (March, 20 2009). Available at SSRN: https://ssrn.com/abstract=1365868 or http://dx.doi.org/10.2139/ssrn.1365868

Jose Lopez-Gracia (Contact Author)

University of Valencia - Department of Accounting ( email )

Campus de Tarongers
Valencia
Spain
34 963 82 83 06 (Phone)
34 963 82 82 87 (Fax)

Reyes Mestre-Barberá

University of Valencia - Department of Accounting ( email )

Edificio Departamental Oriental
Avda. dels Tarongers, s/n
Valencia 46071
Spain

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