The determinants of capital structure of small industrial firms: Theory building with a case study research and empirical test (Dutch text)

The basic research question was how small industrial firms choose their capital structures. Therefore we investigated first if the modern theory of capital structure can explain the financing behavior of small firms. From this part of the research, the majority of the theoretical developments seems to have very little explanatory value when it concerns small firms. The reasons can be found in the general assumptions of these theories, which are far removed from "the reality of the small firm". Therefore new theory building is necessary which starts from the specific characteristics of the small firm.; Given this conclusion, we started a theory building process with the help of the casestudy method. We developed a mid range theory of the capital structure decision in small industrial firms which was afterwards translated in a series of hypothesis. These hypothesis were empirically tested with a canonical correlation analysis and a econometric model that was estimated with the 3SLS method. The financial data needed were collected from the CD-rom of the National Bank of Belgium, containing all financial statements of Belgian firms. The necessary internal data were collected by means of a written survey and a follow up by telephone.; The results reveal that the financial decisions of the entrepreneur are not only guided by value maximisation as only financial goal, such as suggested by financial theory. Bounded rationality seems to be an important dimension of the financial utility function. One of the most important motives to choose a financing source is the perception of the price of that financing source.; In general one can conclude that entrepreneurs are guided by three interdependent financing strategies: A matching strategy (determinant asset structure), a pecking order in financing preference (determinants profitability and growth) and a target debt ratio. This target debt ratio is consistent with the pecking order in financing preferences. The underlying motives for these strategies are risk management, control goals and cost price consideration.; Financing constraints seem to have an influence on the financing choice too. The most important determinants from a supply side of bank credit are the repayment capacity and collateral.