An International Comparison of Small Firm Financial Structure

This paper explores the equity and debt structure of small firms in the United States and Australia. United States data is from the 1998 Survey of Small Business Finances sponsored by the Board of Governors of the Federal Reserve Board and the U.S. Small Business Administration. Australian data is from the Australian Bureau of Statistics Longitudinal Database for 1998. A cluster analysis process is used to identify a range of "typical" financial structures. Results are analysed for association with potential influences on such structures. Included are industry, age, profit (measured in absolute and relative terms), sales growth, asset structure, and size (measured by sales and employee numbers). Regional differences are identified but the results are generally supportive of the pecking order framework and general agency cost explanations of financial structure.