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Do small and medium sized enterprises match their assets and liabilities? Evidence from Portugal

Do small and medium sized enterprises match their assets and liabilities? Evidence from Portugal

Bartholdy, Jan, Mateus, Cesario and Olson, Dennis (2012) Do small and medium sized enterprises match their assets and liabilities? Evidence from Portugal. International Journal of Business and Finance Research, 6 (4). pp. 13-31. ISSN 1931-0269 (Print), 2157-0698 (Online)

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Abstract

For small and medium-sized enterprises, various types of debt are not identical. There are specific costs and benefits associated with each funding source. We argue that the asset and liability sides of the balance sheet are interrelated. Specifically, we hypothesize that firms match specific assets with a specific set of liabilities. We test our theory using a unique sample of Portuguese firms for the years 1990-2000. Our data set identifies various short-term and long-term funding sources, as well as the uses of these funds to purchase various assets. Our results reject independence between the two sides of the balance sheet — suggesting that small and medium-sized firms in Portugal do indeed match specific assets with specific liabilities. The implication for financial theory is that each asset or project may have a different weighted average cost of capital. That is, there is no single weighted average cost of capital for a typical small to medium-sized firm.

Item Type: Article
Additional Information: [1] First published: 2012. [2] Published as: International Journal of Business and Finance Research, (2012), Vol. 6, (4), pp. 13-31.
Uncontrolled Keywords: small and medium-sized enterprises, Portugal, finance, asset-liability matching, SMEs, capital structure, sources and uses of funds
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business > Centre for Governance, Risk & Accountability (GRA)
Faculty of Business > Department of Accounting & Finance
Related URLs:
Last Modified: 14 Oct 2016 09:23
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/9416

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