Determinants of Capital Structure in Non-Financial Companies

Fabian Kühnhausen and Harald Stieber

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: In this paper, we evaluate firm-, industry- and country-specific factors determining a firm's capital structure. The empirical validity of several capital structure theories has been ambiguous so far. We shed light on the main drivers of leverage and depict differences in industry and country characteristics. Using a short panel data set with a large cross-section, we are able to show that firm size, industry leverage, industry growth and tax shield positively affect leverage ratios, while profitability and liquidity have negative impacts. Moreover, our model is an improvement over Rajan and Zingales' (1995) four-factor core model in terms of explaining data variation. The results are robust against different panel estimators, decompositions and over time.

Keywords: Capital Structure; Non-Financial Companies; Pecking Order Theory; Trade-off Theory (search for similar items in EconPapers)
JEL-codes: F36 G14 G15 G18 G32 (search for similar items in EconPapers)
Date: 2014-06-23
New Economics Papers: this item is included in nep-cse
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Citations: View citations in EconPapers (6)

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