Capital structure models vs econometric models evidence about sme's in Huambo Province – Angola

Abstract

The present work aims to study the determinants of Huambo province SME’s capital structure, assessing the relevance and validity of the key attributes suggested by the literature as determinants of capital structure and test the explanatory power of each of those in the corporate debt ratios. To achieve this objective, financial information of 35 companies based in Huambo province - Angola were empirically analyzed. Companies were classified into four sectors according to the NACE Rev1, for the period between 2012 and 2016. Based on the application of a multiple linear regression model of random effect, our results indicate that for Huambo companies the following prevail: (i) company growth does not influences debt; (ii) regarding to the company size, overall, the greater the company, higher will be company debt; (iii) asset structure positively influences the debt levels its low significance; (iv) in terms of income, it was concluded that it does not determine firm debt,  given that they prefer self-financing; (v) as profit  variability, contrary to what was expected, it determines the medium and long term and total debt; (vi) with respect to the business sector, it was noted that it has a significant influence on average debt level of Huambo companies.