Funding decisions in the metal-mechanic industry of Valle del Cauca

The purpose of this study is to find the factors that influence the long term funding decision making in the metal mechanic industry at Valle del Cauca (Colombia), unexplored until now. The study covers the 2000-2006 period. The method used was an analysis of the financial structure and a Panel Data econometric model. The reference framework in based on the main theories for capital structures and field test at the domestic and international level. A long term debt level is found that is highly dependent on credit with financial institutions; the determining factors and their relationship with debt are: fiscal protection other than debt (-), growth opportunities (+) and profitability (-). The analysis of the factors don't allow to fully demonstrate if the companies want to find an optimum capital structure or to avoid asymmetrical information problems given the poorly developed Colombian capital market, which warrants expanding the research in this field.