Abstract:

Decisions on capital structure have always been considered the most important in the context of corporate financial management. Modigliani and Miller's (1958) article on the irrelevance of the capital structure of the firm's value led to the emergence of several theories that seek to explain capital structure, namely, the Trade-Off theory and the Pecking Order theory. The purpose of this paper is to verify which of the determinants of the capital structure have a greater impact on the capital structure, as well as to test which of the following theories about capital structure, Trade-Off theory and Pecking Order theory have a greater explanatory power in the way portuguese manufacturing SMEs are financed. The estimation of fixed effects regression models was used as methodology. Of the estimates made, the majority had good determination coefficients with good explanatory capacity and statistical significance. The variables that present a greater impact and explanatory capacity are the profitability, general liquidity and tangibility of the assets.The evidence presented reinforces a greater explanatory power of the Trade-Off theory.