ISSN: 2225-8329
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This study examines how the personal characteristics of firm shareholders and senior executive managers shape the capital structure of small and medium-sized enterprises (SMEs) in Pakistan's automotive parts sector. Corporate governance research on SME financing has largely centred on boards of directors, leaving the distinct roles of owners, who bear residual risk, and hired senior managers, who run daily operations, underexplored in weak institutional settings where these layers often overlap. Using primary survey data from 175 automotive parts SMEs registered with the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), this study applies ordered logit regression to four capital structure outcomes: the debt-to-equity ratio, short-term debt, long-term debt, and total equity. The results show that shareholder age raises reliance on long-term debt, shareholder education raises equity use, and shareholder external networking lowers long-term debt while raising equity use. Senior executives' age and outside networking reduce debt reliance, while executive experience raises equity use. The findings extend agency theory and upper echelons theory to SME financing in an emerging market, with implications for governance-sensitive lending policy and family business succession planning.
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