Year of Graduation
Capital Structure Choice at Different Life-Cycle Stages
The aim of the work is to develop a model, which is capable to explain capital structure (CS) choice on different life cycle stages of small and medium size companies in the emerging market of Russia. We find that the ratio between debt and equity varies on different stages of life cycle; capital structure of a firm is higher on the stage of growth and decline, lower - on the stage of maturity. Regression analysis of CS choice determinants demonstrates that factors that influence financial decisions of the firms are almost the same among the life cycle: profitability, tangibility, size. Finally, on the stage of growth firms follow pecking order theory, while on the maturity stage trade-off theory more correctly describes the financial decisions.