Based on investigations based on background variables of year 2010 in connection with the background variables I conclude the following:
I concluded from results in connection with SME classification that micro-sized enterprises operate with higher equity ratio and lower ratio of accounts payables, like their small and medium-sized competitors.
In case of all three capital structure indicators I came to the conclusion that the territorial (regional) location makes a significant impact on the capital structure of the enterprises.
Through activity clusters I came to the conclusion that activities influence significantly Hungarian SMEs’ capital structure, and in each cluster may identify significantly different financing patterns.
Business companies without legal personality operate with significantly lower equity ratio and ratio of accounts payables, while their long-term debt ratio is higher, like business companies with legal personality.
I summarize my conclusions about capital structure determinants according to the hypothesis. To make traceability of conclusions easier I summarize the results of linear regression models in connection with determinants in Table 3.. Under each of coefficients in parentheses significance of coefficients is shown.
Table 3.: Summary of the results of the regression models Independent variables HLK_arany ST_arany SZALL_arany (1/a)
Dependent variables Long-term Independent variables HLK_arany ST_arany SZALL_arany (4/a) Export
F-statistic 7638,055 6130,544 6846,066
F significance 0,000 0,000 0,000
All observation 866 636 866 636 866 636
Source: own creation
In connection with capital structure determinating factors and their indicators I make the following submissions:
Findings related to hypothesis H1:
In connection with tangibility I proved that coverage ability of assets has significant role in the financing of SMEs, but the higher rate of fixed assets increases only the proportion of long-term external liabilities, while decreases the ratio of accounts payables. Therefore, I hold my (1/a) hypothesis formulated in connection with tangibility confirmed.
In case of investigation of company size I came to the conclusion that larger enterprises characterized by higher long-term debt ratio and ratio of accounts payables. This can be explained that the larger companies may access to credit easier and better terms, and by greater market weight may get longer payment deadlines. Therefore, I hold my (1/b) hypothesis formulated in connection with company size confirmed.
Obligated results in connection with the profitability in case of equity ratio and ratio of accounts payables confirm prevail of the Pecking Order Theory. Hungarian firms with higher profitability activities operate with higher equity ratio, less use external resources and have a good payment discipline. Therefore, I hold my (1/c) hypothesis formulated in connection with profitability confirmed.
In connection with tax burden in case of all capital structure indicator I found positive relationship, which can be explained utilization of tax savings arising from the interest. This result is rather typical for investigations conducted on samples of the large companies, but not unprecedented also in case of SME samples [e.g. (Sogorb-Mira &
López-Gracia, 2003)]. Therefore, I hold my (1/d) hypothesis formulated in connection with tax burden confirmed from the standpoint that the effect is prevail, but my results partly contradict the findings of previous international studies.
Tax savings from amortization brought significant results only in case of ratio of accounts payables. In case of tax savings from tax allowances long-term debt ratio resulted a significant relationship. Enterprises with the increase of indebtedness live with increasing proportion of the possibility of tax allowances and tax exemptions. Therefore, I hold my (1/d) hypothesis formulated in connection with non-debt tax savings instruments confirmed from the standpoint that the effect is prevail, but my results partly contradict the findings of previous international studies.
My result in connection with liquidity confirmed that high liquidity is an important element of creditworthiness. In case of ratio of accounts payables proved that higher liquidity associated with better payment discipline, therefore the relation is negative. Therefore, I hold my (1/e) hypothesis formulated in connection with liquidity confirmed.
In case of willingness to invest is confirmed that Hungarian SMEs need to implement their major investments involve additional external resources. My results are in agreement with Bell & Vos’s (2009) result of research conducted in small-sized enterprise sample. Therefore, I hold my (1/f) hypothesis formulated in connection with willingness to invest confirmed.
H1: Effect of capital structure’s determinants proved in previous international studies prevails also by Hungarian small and medium-sized enterprises.
Based on my results I accept hypothesis H1.
Findings related to hypothesis H2:
Conducted investigations proved my entire hypothesis in connection with rate of foreign ownership. The greater foreign ownership operated enterprises face with more and better financing options, therefore characterized by a higher indebtedness, thereby their equity ratio is typically lower as well. The demonstrated negative relationship with ratio of accounts payables betrays a better payment discipline.
Therefore, I hold my (2/a) hypothesis formulated in connection with foreign ownership confirmed.
In connection with the role of state and municipal ownership first I came to the conclusion that they affect the capital structure of Hungarian SMEs differently.
In connection with state ownership the hypothesis has been proved, that greater rate of state ownership is associated with a higher equity ratio. In case of ratio of accounts payables I got just the opposite result as my hypothesis, namely major state-owned enterprises have better payment discipline.
In connection with municipal ownership I got just the opposite result as in case of state ownership. The greater municipal ownership is associated with lower equity ratio. Conducted investigations confirmed my hypothesis concerning to ratio of accounts payables, namely greater municipal ownership is associated with higher ratio of accounts payables. Therefore, I hold my (2/b) hypothesis formulated in connection with state and municipal ownership confirmed from the standpoint that the effect is prevail, but my results contradict the findings of previous international studies.
H2: The ownership structure affects the Hungarian small and medium-sized enterprises’ capital structure.
Based on my results I accept hypothesis H2.
Findings related to hypothesis H3:
Impact of asset intensity on capital structure in case of capital structure indicators brought no significant result. Therefore, I reject my (3/a) hypothesis formulated in connection with asset intensity.
In connection with labour intensity determinant I diagnose that it has with all three capital structural indicator a significant negative relation.
Namely, more labour-intensive enterprises characterized by lower equity ratio, lower long-term debt ratio and lower ratio of accounts payables.
Negative relationship with all three indicators can only be explained that firms with more labour-intensive activities prefer short-term loans and other short-term sources. Therefore, I hold my (3/b) hypothesis formulated in connection with labour intensity confirmed.
I revealed a negative relationship for indicator of product uniqueness in case of equity ratio and ratio of accounts payables. Namely, grater rate of expenses operating enterprises – which also interpretable as inflexibility of the product portfolio – have lower equity ratio, and they can live less with the opportunity of trade credit. Therefore, I hold my (3/c) hypothesis formulated in connection with product uniqueness confirmed from the standpoint that the effect is prevail, but my results contradict the findings of previous international studies.
H3: The character of the product and the activity affect the Hungarian SMEs' capital structure decisions.
Based on my results I accept hypothesis H3.
Findings related to hypothesis H4:
In connection with the measurement of export orientation I can say that only export turnover to total turnover indicator brought significant result in case of all capital structure indicators. I hold my hypotheses confirmed, under which mainly export-oriented companies operate with lower indebtedness and are characterized by higher ratio of accounts
payables. By the equity ratio the negative result was obtained, which means that, exporter firms have smaller equity ratio, as enterprises product only to internal market. This is due to the key role of vendor financing. Therefore, I hold my (4/a) hypothesis formulated in connection with export orientation confirmed.
Market position indicator brought significant result in case of equity ratio and ratio of accounts payables. By confirming, those enterprises, which are able to finance their accounts receivables with their suppliers, have higher ratio of accounts payables, and thus less equity ratio need to maintain. Therefore, I hold my (4/b) hypothesis formulated in connection with market position confirmed.
H4: Input and output market characteristics of the Hungarian small and medium-sized enterprises have an impact on their financing decisions.
Based on my results I accept hypothesis H4.
I summarized my decisions concerning to accept or reject of sub-hypotheses in Table 4..
Table 4.: Hypotheses and results
Determinants Long-term debt ratio Equity ratio Ratio of accounts payables
Hypotheses Result Decision Hypotheses Result Decision Hypotheses Result Decision
Tangibility + + confirmed - - confirmed - - confirmed
Company size + + confirmed - + rejected + + confirmed
Profitability - no significant rejected + + confirmed - - confirmed
Tax burden - + rejected + + confirmed - + rejected
Tax savings from
amortization - no significant rejected + no significant rejected - + rejected
Tax savings from
tax allowances - + rejected + no significant rejected - no significant rejected
Liquidity + + confirmed - + rejected - - confirmed
Willingness to invest + + confirmed - - confirmed + no significant rejected
Rate of foreign
ownership + + confirmed - - confirmed - - confirmed
Rate of state
ownership - no significant rejected + + confirmed + - rejected
Rate of municipal
ownership - no significant rejected + - rejected + + confirmed
Asset intensity + no significant rejected - no significant rejected + no significant rejected
Labour intensity - - confirmed + - rejected - - confirmed
Product uniqueness + no significant rejected - - confirmed + - rejected
Export orientation - - confirmed + - rejected + + confirmed
Market position - no significant rejected - - confirmed + + confirmed
Source: own creation