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type of finance source they had chosen (should they start a new business), the majority indicated that it was the cheapest form of finance and that it was easy to access. From the above results it can be seen that availability, the finance cost and accessibility were non-behavioural factors that influenced capital structure decisions of the participants.
DISCUSSION
From the above results it can be seen that the resulting capital structure of small firms is influenced by perceptions of debt and equity. However, owners' perceptions may not be the only factors influencing the sources of finances that small firms use, rather a number of external factors such as the availability of funds and accessibility. This was consistent with the results found in Michaelas et al. (1998). Also the past experience of debt and equity will affect the capital structure decision. Business owners who have had unfavourable experiences with regard to previous sources of
finance chosen would rather forgo both growth opportunities than issue external finance. All of the business owners indicated that it was very important for them to have personal control of their businesses; this conic\ further explain why external equity is the least preferred source of capital as they had the desire to retain control of their business. These results were consistent with the results from Zellweger, Frey and Halter (2009) who mentioned that participants were willing to
reject investments in profitable projects if it was going to affect their independence goal. The findings provide support for the existence of the pecking order behaviour. It is evident that participants indicated personal savings as a source of capital for funding a business as the first choice followed by issuing of debt and then lastly equity which can be proved by the pecking order theory. This could further prove that small business owners want to maintain control of their businesses. Small business owners prefer to rely on personal savings and raise debt only when it is necessary. They rely on personal savings as it is difficult to raise external finance because their
credit record is limited to their personal capacity (for example in sole proprietorships). These findings above are similar to the Hamilton and Fox (1998) study which found that small business owners preferred internal equity to external equity. He further mentioned that the main reason for preferring internal equity to external equity was the need for constant control or ownership of the business.
CONCLUSION
The research has attempted to explore the effects of owner perceptions and preferences towards different types of financing thus examining behavioural factors that influence capital structure decisions. The study found that both non behavioural and behavioural factors play a role in shaping capital structure decisions of restaurant owners in Grahamstown. Most of the results found in this research are consistent with previous studies. However due to the limited small sample size, this study cannot be conclusive evidence of the factors influencing capital structure decision making by small business owners in Grahamstown. For further research it is recommended that there should be a more in depth research on the behavioural factors influencing capital structure decision making.
FACTORS AFFECTING CAPITAL STRUCTURE DECISIONS: A SMALL BUSINESS PERSPECTIVE 191