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On the Relevance of Agency Conflicts in SME Debt Maturity Structure


  • Jose Lopez-Gracia,

    Corresponding author
    • Address correspondence to: Jose Lopez-Gracia, University of Valencia, Campus de Tarongers s/n, Valencia 46071, Spain. E-mail:

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    • Jose Lopez-Gracia is full professor at the Faculty of Economics, University of Valencia.
  • Reyes Mestre-Barberá

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    • Reyes Mestre-Barberá is associate professor at the Faculty of Economics, University of Valencia.

  • The authors are grateful to Félix López-Iturriaga, Pedro Martinez-Solano, and Julio Pindado for their valuable comments and suggestions made on a previous version of this manuscript. We thank Alejandro Casino, Amado Peiró, María Rochina, and Juan Sanchis for their excellent research assistance. We would also like to thank the participants in the 2010 Annual Conference of the Spanish Finance Association and, particularly, Pablo Ruiz and Andrés Almazán for their helpful comments. Funding from the Generalitat Valenciana (Valencia Regional Government) is gratefully acknowledged (Project GVPRE/2008/349).


Previous theoretical research asserts that an optimal policy of debt maturity structure mitigates the various agency conflicts that arise through debt contracts. We test this hypothesis on Small and Medium-Sized Enterprises (SMEs), which are very sensitive to agency problems. Such problems mainly arise between owners and debt providers, due to SMEs recording high growth and having few fixed assets and informational asymmetry. We provide evidence on the relevant effect of underinvestment, asset substitution, and overinvestment problems on SME debt structure. Results appear to be robust to both the endogeneity problem of explanatory variables and the censored dependent variable.