This article examines theories of capital structure pertaining to small firms and looks at the capital structure of small to mid-sized manufacturing firms within the context of those theories. Results provide support for Leland and Pyle's (1977) Signaling Theory, Myer's (1984) Pecking Order Theory, Berger and Udell's (1998) Life Cycle Theory. Contrary to the findings of prior research, these results revealed that industry sector was not a significant determinant of capital structure. Rather, these findings show that capital structure in small to mid-sized firms is determined by measures of firm size, firm age, organizational status, profitability, and asset structure.

JEL Codes

G32, M13


Capital Structure, Manufacturing, Small Firms, Small Business