Based on the analysis of previous studies we have chosen several signi. In addition to this, the two variables profitability and growth established negative relationship and the remaining four variables tangibility, size, age and taxshield showed positive relationship with capital structure. 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. Though an understanding of capital structure of banks is required, much research has not been conducted on the topic. Capital structure determinants of publicly listed companies in saudi arabia turki sf alzomaia, king saud university abstract this paper investigates the capital structure of listed firms in saudi arabia, using firm specific data to study the determinants of leverage. 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. Effects of leverage on the shareholders return or earnings per share have. Page 2 definition the capital structure of a firm is the mix of. Most empirical studies that examine the determinants of capital structure have been done for developed or specific country and there is little evidence in subsahara africa. Pdf this paper examines the theoretical and empirical determinants of firms capital structure choice. The study extends empirical work on capital structure theory in three ways. Jan 20, 2015 capital structure and its determinants 1. There are already hundreds of articles on capital structure and what its firmspecific determinants are, as researchers are trying.
First, it examines a much broader set of capital structure theories, many of. In particular, the pecking order theory of capital structure, with past profitability being the major determinant of leverage, is supported. In their study of capital structure in the g7 economies, rajan and zingales 1995 find gearing in the uk to be positively related to tangibility the. But we also find significant differences in the determinants of long and shortterm forms of debt. Pdf determinants of capital structure in developing countries. Determinants of capital structure presentation capital. The aim of this study is to examine the determinants of capital structure via a crosscountry comparison between the u. In section 1 the most prominent theoretical and empirical findings are surveyed. Another factor which can affect the capital structure of a. Our main objective is to investigate whether and to what extent the main capital structure theories can explain capital.
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. What is the best capital structure depends on several factors. 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. 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. 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.
In this study, we attempted to analyze the determinants of capital structure for indian. In this paper we investigate the capital structure determinants of greek, french, italian, and portuguese small and mediumsized enterprises smes. Are the determinants of capital structure country or firm. The research will present the fundamental determinants of capital structure and their affecting variables. A comparative study of public and private firms 1 i. Electronic surveys were conducted with a response rate of 29. In section 2 the potential determinants of capital structure are summarized and theoretical and empirical evidence concerning these determinants is provided. The other tested determinants in egyptian companies are found to be not significant. We find a remarkable consistency in sign, significance and economic magnitude. 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. 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. Evidence from non nancial listed german companies maria silva 1 antonio cerqueira 1 elisio brandao 1 1 fepup, school of economics and management, university of porto.
The external stimuli in the post financial liberalization period, whether in the form of fiscal or. This study investigates the determinants of capital structure of iranian firms listed in the tehran stock exchange. 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. However, even after decades of active theoretical and empirical research, what determines a companys capital structure remains an empirical question in corporate finance. Institutional and structural determinants of investment. Determinants of capital structure a study of manufacturing. A study on determinants of capital structure in india.
The determinants of the capital structure of listed on stock. Whereas size, growth rate and tax rate is positively related with. Determinants of capital structure an empirical evidence, us by ra the university of lahore, pakistan. Determinants of capital structure in nigerian banking sector. Commercial banks played a major role in start of financial crisis of 200708. This study seeks to identify the determinants of indian central psus capital structure.
In pakistan, mashar and nasr 11 suggest that asset tangibility, profitability and roa are negatively correlated with debt. The results indicate that most of the determinants of capital structure suggested by capital structure theories appear to be relevant for swedish firms. 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. The investigation is performed using generalized method of moment gmm approach for 146 listed firms in the tehran stock exchange over the period 2003 to 2008. Determinants of organizational structure free download as powerpoint presentation. The determinants of the capital structure of listed on. The modern theory of capital structure was established by. Common factors of leverage such as pro t, size, growth, risk, asset structure. One important factor we consider is the level of maturity of the nancial sector as well as its its structure, which are measured respectively by domestic credit to the private sector as a share of gdp and the ratio of the total value traded in the stock market to domestic credit.
Determinants of organizational structure organizational. This paper approached the issues of capital structure by evidencing commercial banks in ethiopia to uncover the firm level determinant factors of capital structure. Determinants of corporate capital structure among private. A case of listed energy sector companies in pakistan. With the consideration of firm specific factors, the main focus is on researching country effect and macroeconomic impacts.
Capital structure determinants of small and medium enterprises in. This study attempts to extend our knowledge of capital structure and its determinants in listed uk companies. Determinants of capital structure presentation free download as powerpoint presentation. If a firm finances its activities with debt, the creditors expect the amount of the interest and principal fixed, legal commitments to. Pdf the aim of this study is to indicate the influence of several internal determinants on capital structure in different european countries and. Empirical evidence from kuwait ahmad mohammad obeid gharaibeh assistant professor, dept. Determinants of capital structure czech journal of economics and. Result shows that the average debttoequity ratio among these smes is 57 to 43. Firms are more willing to finance their projects with short term debt, rather than long term debt. A quantile regression analysis aviral kumar tiwari faculty of management, ifhe university, ibs hyderabad, india raveesh krishnankutty faculty of management, ifhe university, ibs hyderabad, india abstract. With view to enhance the reliability of the tests, two separate models on the book value of leverage as dependent variables short term debt and long term debt.
Determinants of capital structure for listed construction. Most studies are focused towards understanding the. The vast majority of previous empirical works analyses the capital structure of firms in economies with highly developed stock markets. Pdf this study examines the determinants of capital structure decisions of firms, specifically for small and private firms in developing countries. Read this article to learn about capital structure of a firm.
Introduction the influential paper of modigliani and miller on capital structure irrelevancy has been followed by extensive theoretical research to determine the optimal capital structure. 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. The determinants of capital structure choice sheridan titman and roberto wessels abstract this paper analyzes the explanatory power of some of the recent theories of optimal capital structure. This learning will endeavor to break down the determinants of capital structure in a systemic way and will give the useful and pertinent rule to any individual who needs to have an understanding of the subject. The impact of capital structure determinants on smes leverage. 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. Empirical analysis introduction the sound financing practices of corporate sector in terms of the implication for future financing and thereby investment depends on capital structure. Their analysis is performed upon a firmlevel sample from each of the g7. This thesis finding shed lights on the necessity of using the maturity structure of debt shortterm debt and longterm debt as dependent variables. In this study, we attempted to analyze the determinants of capital structure for indian firms using a panel framework and to investigate whether the capital structure models derived from western settings provide convincing explanations for capital structure decisions of the indian firms. Pdf determinants of capital structure in developing. The study is based on an analysis of the capital structure of saudi 93. The question of a firms optimal capital structure and the determinants of.
Most empirical studies that examined the determinants of capital structure have been done for specific country and there is little evidence of gcc region. It is therefore essential to study the emerging economies as individual countries rather than see them collectively as a group. This study seeks to identify the determinants of indian. Determinants of capital structure mba knowledge base.
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. The determinants of capital structure 3 proceedings of 2nd international conference on business management isbn. 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. 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. Xiaohong huang a dissertation submitted in partial fulfilment of the requirements of the university of twente for.
Several researchers argue that the determinants of capital structure are significantly affected by factors such as the laws and regulations of the country, corporate and personal tax systems and corporate governance. The investigation is performed using balanced panel data. 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 funds. Determinants of bank capital structure the impact of basel iii may 2016 abstract this paper examines which determinants of bank capital structure are reliably decisive for 15 publicly traded european and american banks from 2006 to 2015. Furthermore identifying the determinants of capital structure also can help investors and managers of firm as it will provide better understanding of the firm capital structures strategy by considering companies characteristics in order. The factors influencing the capital structure or determinants of capital structure a are discussed as follows financial leverage or trading on equity. Determinants of capital structure have received much attention among the researchers. Capital structure, a reading prepared by pamela peterson drake 4. Determinants of capital structure an empirical evidence, us. Evidence from china abstract this paper employs a new database, which contains the market and accounting data from more than chinese listed companies up to the year 2000, to document the characteristics of these firms in terms of capital structure. This study contributes in the existing literature by examining the determinants of capital structure of banks in africa thereby closing the gap in the literature. Chen, robert lensink and elmer sterken august1998 abstract this paper studies the determinants of capital structure choice of dutch. A 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.
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