The Financial Growth Life Cycle : An Empirical Examination of Irish SMEs

This paper examines the financing of small and medium sized enterprises (SMEs hereafter) through a financial growth life cycle paradigm. Reporting the financing patterns of 299 Irish SMEs across six age categories, the relative importance of sources of debt and equity finance for each age category is revealed. Observed financing patterns incorporate elements of agency and pecking order theories, and emphasise the primary importance of internal equity in financing of the firm. Results suggest support for the financial growth life cycle, although contrary to conventional wisdom firms in the youngest age category report a relatively high use of debt finance. This may be explained by the provision of the personal assets of the firm owner to secure that debt