New Evidence of the Tax Effect on SME Optimum Debt Maturity Structure
33 Pages Posted: 21 Mar 2009
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
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