What Do We Know about the Capital Structure of Privately Held US Firms? Evidence from the Surveys of Small Business Finance


  • I thank seminar participants at DePaul University, at the Melbourne Centre for Financial Studies, and at the 2008 Annual Meeting of the Academy of Entrepreneurial Finance in Las Vegas, NV. In addition, I thank Charles Ou and Ivo Welch for helpful comments and suggestions. The US Small Business Administration provided funding for this research. In addition, I thank James Ang, Jonathan Dombrow, Dan Lawson, Chad Mowtry, Charles Ou, and Ivo Welch for helpful comments and suggestions. The comments of an anonymous referee and Bill Christie (Editor) significantly improved the content and exposition of the paper. Any remaining errors are solely the responsibility of the author.


This study examines the capital-structure decisions of privately held US firms using data from four nationally representative surveys conducted from 1987 to 2003. Book-value firm leverage, as measured by either the ratio of total loans to total assets or the ratio of total liabilities to total assets, is negatively related to firm age and minority ownership; and is positively related to industry median leverage, the corporate legal form of organization, and to the number of banking relationships. In general, these results provide mixed support for both the Pecking-Order and Trade-Off theories of capital structure.