CAPITAL STRUCTURE IN SMEs: PECKING ORDER VERSUS STATIC TRADE-OFF, BOUNDED RATIONALITY AND THE BEHAVIOURAL PRINCIPLE. Silvia Swinnen # Wim Voordeckers * Sigrid Vandemaele ° Abstract In this paper, we scrutinize financing decisions in small and medium sized firms. In the finance literature, two competing models – the static trade off theory and the pecking order theory – try to explain the financing decisions in firms. Given the special cognitive style of management in SMEs, characterized by bounded rationality and intuition, we investigate whether the behavioural principle has a higher explanatory power than the two traditional competing theories in relation
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