Capital structure

: impact of covid-19 and war in Ukraine on Portuguese SME's

Abstract

This dissertation studies how the capital structure of Portuguese small and medium-sized enterprises (SMEs) was affected by two major recent crises: the COVID-19 pandemic and the Russia–Ukraine war. Using a panel dataset covering the period from 2013 to 2023, the study applies a linear regression model to examine the impact of these crises on firms’ financial leverage, measured by the debt-to-asset ratio. Control variables include profitability, size, asset tangibility, liquidity, and debt structure, while crisis-specific dummy variables account for external shocks. The analysis is grounded in the main capital structure theories: Modigliani & Miller (1965), Trade-Off Theory (Myers, 1984), Pecking Order Theory (Myers & Majluf, 1984), and Agency Theory (Jensen & Meckling, 1976), which provide a comprehensive framework for interpreting the results in the context of SMEs. The findings reveal a significant increase in leverage during the COVID-19 period, largely driven by firms’ access to government guarantees and loan stand stills. In contrast, the effects of the Ukraine war on capital structure appear more moderate, possibly due to its indirect impact on the Portuguese economy. By examining SMEs, this study offers insights into how small and medium-sized firms adjusted their financing structures in response to specific crises, such as the COVID-19 pandemic and the war in Europe and highlights how firm-level characteristics and crisis-specific policies influence financing decisions. Additionally, it underscores the importance of public support mechanisms in times of economic uncertainty.

Date of Award	1 Jul 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Cunha (Supervisor)