AN EVALUATION OF CURRENT CAPITAL STRUCTURE DECISIONS OF TURKISH SMEs

Year 2017, , 400 - 408, 30.06.2017

Safa Demirbas Dilek Demirbas

https://doi.org/10.17261/Pressacademia.2017.560

Abstract

Findings of this study suggest that Turkish SMEs happen to experience
obstacles in raising finance to improve and develop their business environment.
In particular, as information asymmetry and uncertain economic environment are
the key barriers, financial constraints turn out to be main handicap for SMEs’
survival. Despite its own merits, SME owners, in family business case, are
reluctant to take external finance for their projects with the intention not to
lose their independence and control.  The
main purposes of this study are firstly to investigate the issue of financing
of SMEs in Turkey in the theoretical context and secondly to make policy
suggestions for the future.  Miller and
Modigliani (1958)’s basic capital structure theory, Myers, (1984)’s trade off
theory, and Myers and Majluf (1984)’s the pecking order theory are the key
standing theories to examine SMEs’ capital structure needs.  The results of this study are similar to
those reported for most Western economies that owners of SMEs follow a pecking
order theory and prefer retained profit to external finance in order to cover
their financing gaps.   

Keywords

SMEs, capital structure theories, financing

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