Capital Structure and the Life Cycle of Firm

The capital structure overlooks the fact that businesses have specific capital needs over their life cycle. The study explores, by using the lens of the company life cycle, the funding options for small and medium-sized businesses, i.e. those most vulnerable to knowledge and opportunity issues. In the empirical literature,people described thatthe controversy regarding determinants of the decisions on the capital structure is based on the inability to consider different levels of the knowledge complexity as well as the characteristics and requirements of companies in particular phases of their life cycles. The results show that, as companies move through the phases of their corporate life in a banking-oriented world, companies continue to follow different financing strategies and another hierarchy of financial decision making. Unlike traditionalwisdom, debt is shown to be essential to early business operations, which are the first option. The pecking order theory shows a high level of application at the stage of maturity, by contrast, where companies rebalance their capital structure, gradually replacing debt with internal capital, and companies that consolidate business. This pattern of financial life appears homogeneous and constant over time for different industries