Purpose

This paper aims to empirically investigate the existence of dynamic capital structure among small and medium-sized enterprises (SMEs) across their life cycle stages.

Design/methodology/approach

The analysis examined a sample of 15,952 SMEs across five industry sectors for the 2009-2012 period. Several techniques, including ANOVA and multivariate regressions, were used to analyse firm-level data.

Findings

The findings suggest that start-up SMEs, on average, rely on equity capital, and that the level of equity capital increases as firms age. The short-term debt level is particularly high in early life cycle stages, decreasing later on. The long-term debt ratio is positively related to firm age, although it is low in all life cycle stages investigated.

Practical implications

The findings may help several parties, including firm owners, to better understand how capital structure can be related to various life cycle stages. Such an understanding may help these actors use financial resources efficiently.

Originality/value

To the authors’ best knowledge, little research has addressed whether there are any differences in financing patterns over the firm life cycle.