Financial structure, theories and SMEs’ adaptation to climate risk: a systematic literature review of empirical and theoretical insights over three decades (1990 - 2024)

This systematic literature review examines how financial structure has been analysed in relation to firm performance and its potential role in supporting small and medium-sized enterprises (SMEs) in developing countries to adapt to climate-related risk. Using a rigorous protocol based on PRISMA guidelines and a PICO framework-guided search strategy, records from Scopus and Web of Science (1990–2024) were screened and synthesized. From 4,700 records, 191 studies met the eligibility criteria, of which only 12 focused on SMEs in developing countries. The findings show that the literature is dominated by profitability-oriented approaches, with strong reliance on leverage indicators (LTDTA, TDTA) and accounting-based performance measures (ROA, ROE) and is methodologically concentrated in direct-effect regression models, particularly OLS. Within this evidence base, no SME-focused study explicitly incorporates climate risk, and there is limited analysis of how financial structure influences firms’ responses to shocks. These results highlight significant theoretical and empirical gaps. The review reframes financial structure as a resilience-enabling mechanism and calls for integrating climate risk, expanding measurement beyond debt ratios, and adopting methods capable of identifying causal and dynamic relationships.