Short- and Long-Term Debt and SME Performance: A Panel Data Analysis of the Moroccan Construction Sector

Abstract

This study examines the association between short- and long-term debt and the performance of Moroccan SMEs in the construction sector. It draws on agency costs, liquidity and refinancing risk, as well as Pecking Order Theory and Trade-off Theory as interpretative frameworks. The analysis is based on Inforisk accounting data for SMEs observed between 2023 and 2025. The main model uses a balanced panel of 93 firms, representing 279 firm-year observations, and models with firm and year fixed effects. Using raw data, the coefficients for short-term debt (−0.12) and long-term debt (−0.41) are negative but statistically insignificant. After winsorization, short-term debt is negatively associated with ROA at the 10% significance level (−0.08), while long-term debt is negatively associated with ROA at the 5% level (−0.18). Both debt components are also negatively associated with operating performance after winsorization (−0.10 and −0.18; p < 0.05). These findings provide partial and conditional support for the hypotheses of a negative association between debt and performance, without supporting causal inference.

JEL Classification: G32, L25, C23, L74

Paper type: Empirical Research