Welch 2004 documents a very strong negative relation between past. Songb afaculty of management and administration, macao university of science and technology, avenida wai long, taipa, macao, peoples republic of china bschool of economics and finance and center for china financial research, the university of hong kong, hong kong, peoples. Ten independent variables and three dependent variables have been tested using regression analysis. Many studies including pandey 2001 have identified various determinants of capital structure, which generally include tangibility of assets, size, growth, profitability, and age of firms. First, it extends the range of theoretical determinants of capital structure by.
Mar 19, 2008 in this paper we investigate the capital structure determinants of greek, french, italian, and portuguese small and mediumsized enterprises smes. Preliminary analysis of the survey shows some interesting findings. This research investigates the determinants of capital structure among smes in malaysia, among smes within the list of enterprise 50 award winners from 1998 to 2010. Leverage and capital structure determinants of chinese listed companies we assess the financial fragility of the chinese economy by looking at risk factors in the nonfinancial sector. For that reason, agency theory expected negative relationship between tangibility and leverage. On the determinants and dynamics of uk capital structure. The sample comprised 30 pakistani textile sector companies. Determinants of organizational structure free download as powerpoint presentation. It is the employment of an asset source of finance for which.
Evidence from an economy without stock market ignacio munyo. Abstract this paper analyzes the determinants of the sources of funding for the firms of an economy without stock market. Chen, robert lensink and elmer sterken august1998 abstract this paper studies the determinants of capital structure choice of dutch. Capital structure determinants and adjustment speed. Thus, the current study fills the gap in the literature and provided an evidence, using recent and long data, of determinants of capital structure of banking sector in gcc region 1. Therefore, it was observed that analysis of capital structure is incomplete without a detailed examination of all forms of corporate debt. There are numerous factors, both qualitative and quantitative, including the subjective judgment, of financial managers which conjointly determine a firms capital structure. Determinants of organizational structure organizational. Quantile regressions applied to financial data of chinese listed companies find increasing sensitivity over time of corporate leverage to some of its key. Capital structure consists of debt as well as internal and external equity. Songb afaculty of management and administration, macao university of science and technology, avenida wai long, taipa, macao, peoples republic of china bschool of economics and finance and center for china financial research. The study extends empirical work on capital structure theory in three ways. A study on the determinants of the capital structure of ghanaian firms is an important research area that needs to be explored.
The determinants of the capital structure of listed on. We compare the capital structures of smes across countries and differences in country characteristics, asset structure, size, profitability, risk, and growth and how these may impact capital structure choices. Determinants of capital structure a study of manufacturing. A number of theories to explain the capital structure have been developed in the last three decades. Aydin ozkan 2003 conducted study on the determinants of the capital structure of the selected uk firms. Once the available and relevant financial sources for a uruguayan firm are defined, their determinants are analyzed. We find a remarkable consistency in sign, significance and economic magnitude. Capital structure, a reading prepared by pamela peterson drake 4. Determinants of corporate capital structure among private. Capital structure, bank size, dividend payout, profitability, tangible assets, business risk, tax and banking industry introduction determinants of capital structure in financial institutions differ from nonfinancial. In their crosssectional study of the determinants of capital structure, rajan and zingales 1995 examine the extent to which, at the level of the individual firm, gearing may be explained by four key factors, namely, markettobook, size, profitability and tangibility. Our main objective is to explore the link between theory and practice of capital structure. Firms are more willing to finance their projects with short term debt, rather than long term debt. The use of long term fixed interest bearing debt and preference share capital along with equity share capital is called financial leverage or trading on equity.
Box 80125, 3508 tc utrecht abstract this paper presents empirical evidence of both the determinants and the adjust. Jan 20, 2015 capital structure theories 1 net income approach ni suggested by durand it says a change in the capital structure will lead to a corresponding change in the overall cost of capital as well as the total value of the firm if the ratio of debt to equity is increased, the weighted average cost of capital will decline, while the value of the firm. Determinants of capital structure presentation capital. Most empirical studies that examined the determinants of capital structure have been done for specific country and there is little evidence of gcc region. Our main objective is to investigate whether and to what extent the main capital structure theories can explain capital. As such, to maintain optimum levels of debt and equity in the capital structure, decision makers must constantly be in control of capital structure determinants. Capital structure a reading prepared by pamela peterson drake outline 1. Feb 02, 2002 we survey managers of firms in seventeen european countries on their capital structure choice and its determinants.
Comparison of empirical evidence from the use of different estimators. Determinants of capital structure in financial institutions differ from nonfinancial institutions due to issues peculiar to these institutions. Pdf this paper examines the theoretical and empirical determinants of firms capital structure choice. In section 1 the most prominent theoretical and empirical findings are surveyed. Page 2 definition the capital structure of a firm is the mix of. Their analysis is performed upon a firmlevel sample from each of the g7. Abstract in this article we extend the comparative analysis between the results of a pooled ols regression and the use of fixed effects. The factors influencing the capital structure or determinants of capital structure are discussed as follows financial leverage or trading on equity. First, by using dynamic panel methodology we try to identify the financial leverage determinants of macedonian firms. The paper contributes to the capital structure literature by investigating the determinants of capital structure of firms operating in the asia pacific region, in four countries with different legal, financial and institutional environments, namely thailand, malaysia, singapore and australia. Besides, a great deal of previous studies focused mainly on developed countries nonfinancial firms. This thesis finding shed lights on the necessity of using the maturity structure of debt shortterm debt and longterm debt as dependent variables.
Leverage and capital structure determinants of chinese. Evidence from jordanian industrial companies 177 of these studies, some broad categories of capital structure determinants have emerged. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Testing for inconsistencies in the estimation of uk capital structure determinants alan a. Determinants of capital structure mba knowledge base. Based on the analysis of previous studies we have chosen several signi. The static tradeoff theory suggests that the optimal capital structure does exist. Result shows that the average debttoequity ratio among these smes is 57 to 43. Rajan and zingales 1995, tried to explain the determinants of capital structure in their empirical study by going through the details on the factors which make the capital structure differences in large industrial countries. Size, growth, financial cost, profitability, and tangibility are used as independent variables, while leverage is the dependent variable. For banks, which constitute the largest portion of financial institutions in nigeria, liabilities relating to legal capital regulations are the most important factors determining the capital structure.
Xiaohong huang a dissertation submitted in partial fulfilment of the requirements of the university of twente for. Read this article to learn about capital structure of a firm. We may now briefly discuss the key factors governing a firms capital structure decisions. The determinants of capital structure choice titman 1988 the. Another factor which can affect the capital structure of a. Although there have been many prior studies of the determinants of capital structure, the question of what determines the best financing mix that maximizes a firms value is still the most debatable issue in corporate finance. A case of listed energy sector companies in pakistan. Issn 2348 7968 the determinants of capital structure of. Another factor which can affect the capital structure of a firm is a financial crisis. The study of capital structure is an important subject because companies need resources. This study investigates the capital structure determinants of 346 oil and gas firms that are the constituents of the global oil and gas index oilgswd over the period of 2000 2015, taking. Panel data regression analysis is used to investigate the determinants of swedish firms capital structure. Chapter iii concepts and theories of capital structure and profitability.
Titman and wessels 1988, and harris and raviv 1991, however, point out that the choice of suitable explanatory variables is potentially continues. Determinants of capital structure an empirical evidence, us. Theory and practice of capital structure in their crosssectional study of the determinants of capital structure, rajan and zingales 1995 examine the extent to which, at the level of the individual firm, gearing may be explained by four key factors, namely, markettobook, size, profitability and tangibility. Empirical evidence from kuwait ahmad mohammad obeid gharaibeh assistant professor, dept. Determinants of capital structure in nigerian banking sector. A comparative study of public and private firms 1 i. The basic objective of capital structure is the financial mix used by the firm. The determinants of the capital structure of listed on stock. Most empirical studies that analyze the determinants of capital structure have been done for individual countries, thus limiting the generalization and ability of the results of such studies. The theory of trade off was developed by kraus and litzenberger 1973 arguing that the companies choose their optimal capital structure by by evaluating the revenue and costs, debt. Determinants of capital structure an empirical evidence, us by ra the university of lahore, pakistan. Determinants of capital structure theoretical aspects corporate finance literature has focused on two broad categories of explanation for capital structure viz. Leverage and capital structure determinants of chinese listed. Determinants of capital structure for listed construction.
These theories, in contrast to modigliani and millers 1958 assumption of a perfect. Bevan and jo danbolt european bank for reconstruction and development, office of the chief economist, ebrd, one exchange square, london ec2a 2jn, uk, and centre for new and. An empirical analysis of dutch smes remco mockinga, joep steegmansb, acpb netherlands bureau for economic policy analysis, p. Pdf determinants of the capital structure of ghanaian firms. Capital structure is the interdependence of the companys longterm and shortterm debts or the mix of the companys equity and debt capital and the capability of the company to cope with them evidently, every company can not develop without investments and credits, so businessmen borrow money in banks or use obligations. The paper identifies the most important determinants of capital structure of 870 listed indian firms comprising both private sector companies and government companies for the period 20012010. Capital structure determinants muhammad minhas azeem msc applied chemistry department of applied chemistry and biotechnology gc university faisalabad, pakistan capital structure and its determinants 2. To be more accurate, the term capital structure, or financial structure, or financial plan of a company refers to the composition of the longterm sources of. Electronic surveys were conducted with a response rate of 29. The purpose of this paper is to fill the gap in the literature relating to capital structure determinants of banks in subsaharan africa. The impact of capital structure determinants on smes leverage. He examined the empirical determinants of borrowing decisions of firms and. We survey managers of firms in seventeen european countries on their capital structure choice and its determinants.
A study on determinants of capital structure in india. The choice of determinants that may affect capital structure is primarily based on the capital structure theories presented in section 3 below. Firms can increase the level of their leverage through debt factoring by issuing more stock to buy or pay debt. In this paper we investigate the capital structure determinants of greek, french, italian, and portuguese small and mediumsized enterprises smes. Determinants of capital structure presentation free download as powerpoint presentation. In section 2 the potential determinants of capital structure are summarized and theoretical and empirical evidence concerning these determinants is provided. Are the determinants of capital structure country or firm. The roles of firm and countryspecific determinants journal of banking and finance, vol. The source of all the data except for the quit rates is the annual compustat industrial files. Some evidence from banks abstract this paper documents that standard crosssectional determinants of firm leverage also apply to the capital structure of large banks in the united states and europe.
1138 1454 1319 1331 358 782 14 144 22 1208 666 894 1498 1462 799 1115 1052 1142 623 598 196 807 817 417 9 429 143 615 1131 1065 1157 1041 541 1018 368