Firm-Level and Macroeconomic Drivers of Capital Structure: A Quantile Approach to SMEs in Emerging Markets

Abstract

This study investigates the determinants of capital structure among small and medium-sized enterprises (SMEs) in developing countries by employing a panel quantile regression approach. Using data from the World Bank Enterprise Surveys, World Development Indicators, and Worldwide Governance Indicators covering 2010–2022, the analysis explores how firm-specific and macroeconomic variables affect leverage across different points of the conditional distribution. The results suggest that profitability, asset tangibility, and firm size are key internal drivers of leverage, with their effects varying significantly across leverage quantiles. Similarly, external factors such as inflation, interest rates, GDP growth, and institutional quality display heterogeneous influences on SME capital structure. The findings highlight the importance of macroeconomic stability and institutional quality in supporting SME financing, while also pointing to the need for differentiated policy interventions that address the diverse needs of SMEs at various stages of development and leverage positions. The study contributes to the literature by demonstrating the value of distributional approaches in understanding SME financing dynamics in developing economies.