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The Importance of Financial Theories for SME Capital Structure Decisions
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Author(s): João Lussuamo (Universidade Onze de Novembro, Angola), João Lopes (NIDISAG, ISAG – European Business School, Portugal & NECE, University of Beira Interior, Portugal)and Márcio José Sol Pereira Oliveira (Polytechnic Institute of Leiria, Portugal)
Copyright: 2020
Pages: 14
Source title:
Handbook of Research on Accounting and Financial Studies
Source Author(s)/Editor(s): Luís Farinha (University of Beira Interior, Portugal), Ana Baltazar Cruz (School of Management, Polytechnic Institute of Castelo Branco, Portugal)and João Renato Sebastião (Polytechnic Institute of Castelo Branco, Portugal)
DOI: 10.4018/978-1-7998-2136-6.ch005
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Abstract
This chapter aims to analyze the importance of financial theories for SME capital structure decisions. The financial theories considered for this study were trade-off theory and pecking order theory. From the various empirical evidences researched in the Web of Science and Scopus database, it was found that most SME capital structure decisions follow the financial theory of hierarchical hierarchy, that is, the SME finance their investment opportunities through retained earnings, debt issuance, and finally stock issuance.
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