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Debt-oriented Capital Structure and Economic Growth: Panel Evidence for OECD Countries

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  • Shah, Syed Munawar
  • Abdul-Majid, Mariani
  • Karim, Zulkefly Abdul

Abstract

This paper examines the relationship between debt-oriented capital structure and economic growth by analysing a panel data of 16 European countries, based on the availability of data. We find that the corporate leverage in financial and non-financial corporations affects economic growth negatively. Furthermore, the results indicate that the leverage in non-financial corporations affects economic growth more than the leverage in financial corporations. This is due to the direct relationship between economic growth and the real sector and the fact that non-financial corporations in OECD countries hold more debt as compared with financial corporations.

Suggested Citation

  • Shah, Syed Munawar & Abdul-Majid, Mariani & Karim, Zulkefly Abdul, 2019. "Debt-oriented Capital Structure and Economic Growth: Panel Evidence for OECD Countries," European Review, Cambridge University Press, vol. 27(4), pages 519-542, October.
    • Handle: RePEc:cup:eurrev:v:27:y:2019:i:04:p:519-542_00
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