Why small and medium-sized firms tend to make recourse to external debt: an investigation into an Italian sample

The purpose of this research is to identify the determinants impacting companies’ financial structure in SMEs belonging to different economic sectors. The research is due to the current situation which characterizes the banking system and the companies’ environment. Within this context, both companies and stakeholders need to identify the determinants impacting these companies’ financial structure in order to optimize their decisions in terms of short and medium-long term goals and internal/external sources. In a previous research, the frame work of this study has been presented in which some variables impacting companies’ financial structure have been identified. Finally, our sample is composed of 12,175 Italian companies; 2% of them are bankrupt; 97% have external debts. The present research identifies the relationship between variables introduced by the literature on the level of indebtedness. In particular, the following variables have been analysed to assess their impact on suitable funding methods: The growth of the company, the attitude to repaying financial debts, the companies’ financial situation, their age, size, intangible assets ratio, and economic sector. The present research has some interesting theoretical and practical implications, along with some limitations linked to the sample and research method.