This study uses firm level survey data to assess whether the capital structure theory is portable to small firms in developing countries and whether country characteristics play a role in their financing decisions. Using a sample of both small companies and large firms from 24 developing countries covering all regions of the world, our main results show (i) The size of the firm is an important factor in the level of leverage; (ii) Profitability has no bearing in the capital structure decisions of small firms in contrast to large firms, and thus do not follow the pecking order;(ii) The country of incorporation is an important determinant for the debt financing decisions of small firms; (iv) The financing decisions of small firms are sensitive to institutional characteristics, and the macroeconomic and financial environment variables of the country; and (v) The impact of these variables varies with the size of the firm.