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This paper aims to investigate the factors affecting the growth of small medium enterprises (SMEs) from manufacturing sector in Tanzania. Specifically, this study wants to examine the effect of asset structure, profitability, and quality of information, size and age on leverage. Descriptive analysis and frequency were used to investigate the most significant factors that affect the capital structure choice of Tanzania SMEs during the year 2013. In the first model, both results find a negative and significant relationship for profitability and size with leverage while asset structure, quality of information and age show negative but not significant relationship with leverage. However, using a second model, asset structure shows a significant positive relationship with leverage, while quality of information shows significant negative relationship with leverage. The analysis indicates that firstly; the results are consistent with some capital structure theories such as trade-off theory and pecking order theory. Secondly, quality of information, asset structure, profitability and size are important factors that growth of Tanzania SMEs. |
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