Investment determinants of fitness SMEs in Portugal

Abstract

Based on a sample of 182 Portuguese fitness SMEs we study the investment determinants of fitness SMEs in Portugal. The multiple empirical evidence obtained in this study lets us conclude that the main explanatory theories of firm investment cannot be considered mutually exclusive in explaining the investment of Portuguese fitness SMEs, since: 1) they adjust investment as a function of sales, corroborating the assumptions of Neoclassical theory; 2) cash flow is an important financial resource for investment, corroborating the assumptions of Free Cash Flow theory; and 3) external finance, namely debt, is a restrictive determinant of investment, which corroborates the assumptions of Agency theory. Besides these results, we find that growth opportunities and government subsidies are positive determinants of investment in Portuguese fitness SMEs, and the financial crisis of 2008 has a negative influence on investment in Portuguese fitness SMEs. The financial crisis of 2008 also means greater relative importance of cash flow and government subsidies for increased investment, and debt for diminished investment, in fitness SMEs.

Keywords:

• agency theory
• fitness SMEs
• free cash flow theory
• investment
• neoclassical theory
• strategic property management

JEL Classification:

• C23
• G31
• G32
• L26

Additional information

Notes on contributors

Paulo Maçãs Nunes

Paulo Maçãs NUNES, PhD in Economics, Associate Professor at the Department of Management and Economics to Beira Interior University and Researcher in CEFAGE-UE (Center for Advanced Studies in Management and Economics). He is the author of articles in various journals: Research Policy, Journal of Evolutionary Economics, etc. The research interests include applied economics, corporate finance, industrial economics and microeconomics.

Zélia Serrasqueiro

Zélia SERRASQUEIRO, PhD in Management, Associate Professor at the Department of Management and Economics to Beira Interior University and Researcher in CEFAGE-UE (Center for Advanced Studies in Management and Economics). He is the author of articles in various journals: Research Policy, Journal of Evolutionary Economics, etc. The research interests include corporate finance and entrepreneurial finance.

Pedro Guedes de Carvalho

Pedro GUEDES DE CARVALHO, PhD in Economics, Assistant Professor at theDepartment of Sport Sciences to Beira Interior University and Researcher in CIDESD Research Center, UTAD University. He is the author of various journals such as International Journal of Sport Policy and Politics, etc. The research interests include sport economics, sport management and sport sciences in general.