Financial crisis and capital structure decisions. Were all Portuguese Smes in the same boat?

This study explores how the adverse macroeconomic scenario impact small and medium-sized enterprises capital structure, further exploring heterogeneous effects. We find that the financial crisis negatively impacted total debt ratio of Portuguese SMEs, but it was after the crisis that firms decreased their leverage the most, pointing to relevant legacy effects. Short-term debt was particularly affected, with the debt of lower maturity being partially replaced by long-term across the all period. We show that capital structure determinants are responsive to adverse macroeconomic conditions. We also document important heterogenous effects in the capital structure decisions of international and innovative firms during the financial crisis. Our findings reveal that young firms are higher indebted and have a less flexible capital structure. Furthermore, even though no inter-industry effects were found, we show how the higher indebted within industry were under more pressure to reduce their debt ratios