Capital structure and firm performance in European SMEs Does credit risk make a difference?

摘要

Purpose - The purpose of this paper is to investigate whether the relationship between capital structure and firm performance in small- and medium-sized enterprises (SMEs) is moderated by credit risk. Design/methodology/approach - The authors empirically test whether an SMEs credit risk affects the SME's relationship between capital structure and firm performance by using a 2012 cross-sectional sample of European SMEs from Austria, Belgium, Finland, France, Germany, Italy, Portugal, Spain, Sweden and the UK. Findings - The empirical results suggest that in low credit risk SMEs, the debt ratio is negatively related to firm performance; however, this relationship is not present in high credit risk SMEs. Therefore, it is indicated that SME credit risk moderates the relationship between capital structure and firm performance. Practical implications - The findings of the paper will enable financial managers to understand the importance of SMEs' credit risk and will assist them in maximizing firms' performance. Originality/value - This paper extends the findings of previous studies by examining whether credit risk affects the relationship between capital structure and firm performance.