Author(s): Mohammad O. Al-Smadi
Although of the important role for SMEs in promoting economic growth, as well as in combating poverty and unemployment, the determinants of their capital structure have not been studied sufficiently. Using a panel data of (77) SMEs in Jordan, this study examines factors that affect choices of capital structure. Two models were developed, the long-term debt model and the short-term debt model. The regression results of the long-term model show that assets structure, growth, size, and liquidity have a beneficial impact on the long-term debt ratio, while profitability has a negative effect. The results of the short-term model show that assets structure, size, and profitability have a negative impact, while growth has a positive impact. The results of the study can be used by the management of SMEs and government entities, which develop policies that aim to support and foster the emergence of SMEs in the Jordanian economy.