The impact of EU funding in portuguese SMEs capital structure

Abstract

This dissertation researches the impact of European Union (EU) funding on the capital structure of Portuguese small and medium-sized enterprises (SMEs) between 2013 and 2023. Given Portugal’s high SME concentration and traditionally low capitalisation, the study explores whether public investment programmes, namely Portugal 2020, Portugal 2030, and the Recovery and Resilience Plan (PRR), serve as effective substitutes for debt financing and as a source of capitalisation for Portuguese SMEs. Building on traditional capital structure theory and using a fixed-effects panel regression model applied to a sample of over 17 000 SMEs, the study tests the correlation between EU funding and changes in leverage. Empirical results confirm that asset tangibility and profitability positively impact leverage as was expected according to existing literature, while firm size and growth opportunities show contrary results. Regarding EU funding, the PRR program shows a consistent negative relationship with debt levels, suggesting a potential deleveraging effect. However, results for Portugal 2020 and Portugal 2030 are mixed. These findings imply that while EU funding may influence SME financing decisions, the impact is program-specific and contingent on structural characteristics. The study highlights the need for more complete funding data and suggests that policymakers and managers view EU funding not just as project financing but as a potential tool for capital structure optimization.

Date of Award	22 Oct 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Cunha (Supervisor)