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Capital Structure Determinants in German SMEs: Panel Analysis and Policy Recommendations

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Shugliashvili, T., Pirveli, E., Munjishvili, T., Deari, F. Capital Structure Determinants in German SMEs: Panel Analysis and Policy Recommendations. Credit and Capital Markets – Kredit und Kapital, 56(3-4), 313-351. https://doi.org/10.3790/ccm.2023.1441801
Shugliashvili, Teona; Pirveli, Erekle; Munjishvili, Tea and Deari, Fitim "Capital Structure Determinants in German SMEs: Panel Analysis and Policy Recommendations" Credit and Capital Markets – Kredit und Kapital 56.3-4, 2023, 313-351. https://doi.org/10.3790/ccm.2023.1441801
Shugliashvili, Teona/Pirveli, Erekle/Munjishvili, Tea/Deari, Fitim (2023): Capital Structure Determinants in German SMEs: Panel Analysis and Policy Recommendations, in: Credit and Capital Markets – Kredit und Kapital, vol. 56, iss. 3-4, 313-351, [online] https://doi.org/10.3790/ccm.2023.1441801

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Capital Structure Determinants in German SMEs: Panel Analysis and Policy Recommendations

Shugliashvili, Teona | Pirveli, Erekle | Munjishvili, Tea | Deari, Fitim

Credit and Capital Markets – Kredit und Kapital, Vol. 56 (2023), Iss. 3-4 : pp. 313–351

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Teona Shugliashvili, MBA, Ludwig Maximilian University of Munich, Munich Graduate School of Economics, Akademienstreet. 1/I, 80799, Munich.

Prof. Dr. Erekle Pirveli, Caucasus University, Saakadze Str. 1, Tbilisi 0102, Georgia.

Prof. Dr. Tea Munjishvili, Tbilisi State University, 2, University Street, 0186 Tbilisi, Georgia and Maritime University of Szczecin, Poland.

Assoc. Prof. Dr. Fitim Deari, South East European University, Bul. “Ilindenska” number 335, 1200 Tetovo, Republic of North Macedonia.

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Abstract

This study investigates the financing decisions within German SMEs, examining firm-specific, macroeconomic, and news-related determinants. Utilizing a 10-year dataset encompassing 13,051 SMEs, we employ a dynamic panel data model with an unbiased Dynamic Panel Fractional (DPF) estimator to identify the key variables influencing the debt-to-equity ratio. The findings underscore the importance of factors such as the non-debt tax shield, firm size, interest rate spread, and the economic policy uncertainty index.

The study’s findings propose the following policy implications: 1) Policy initiatives targeting firm size and non-debt tax shields affect SME leverage; 2) Policies addressing the term spread and economic uncertainty influence debt levels across various German industries; 3) Industry-specific SME policies are advisable, due to the significant industry effects on German SME leverage; 4) SME policy incentives yield short-term effects on capital structures, as SMEs adjust leverage within 8 months.