The capital structure choices of Agrifood firms. Evidence from Italian SMEs

The theme of capital structure has always been of great interest in the debate between scholars in the business research field. The aim of this paper is to test the application of the different financing theories in explaining the capital structure choice of 82 Small and Medium Enterprises (SMEs) within the Italian agro-food industry. The results show that the financing decisions in these firms could be explained through the main capital structure theories: Pecking Order Theory (POT), Trade-off Theory and Fiscal Theory. In agreement with POT, our results confirm an approach comprising an initial check on availability of internal resources, followed by the use of external capital (particularly bank debt). The research questions of this paper are the following: How do companies finance themselves? What are the mains factors that influence a firm’s financing decisions?