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Capital structure and firm characteristics: an empirical analysis from Egypt

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  • Mohammad M. Omran
  • John Pointon

Abstract

Purpose - The aim of this paper is to investigate differences in capital structures across industries in Egypt paying particular attention to: corporate characteristics, such as liquidity, asset structure, growth, and size; fiscal characteristics, namely, the application of differential corporate tax rates; and stock market activity. Design/methodology/approach - Comparisons are made between the four main industrial sectors: food, heavy industries, contracting and services. For each industry four aspects of capital structure are assessed. Firms are also classified according to whether their shares are actively traded on the Egyptian stock market. Multiple regressions are run to test a range of hypotheses. ANOVA and multiple comparison procedures are also employed. Findings - Across Egyptian firms, higher business risks do not generally result in lower levels of long‐term capital structure. The contracting sector is significantly different from food, heavy industries and services in its determinants of its short‐term financing and interest ratios. The sector also has a higher level of debt, and so a hypothesised tax‐induced higher debt level for the services sector, which has the highest corporate tax rate, is rejected. Asset‐backing is particularly important in heavy industries, and in non‐actively traded firms. Size and growth are positively related to short‐term financing in heavy industries and services. Originality/value - The value lies in the comprehensiveness of the study, covering both short‐ and long‐term capital structures across industries, both income measures and capital indebtedness, and distinctions according to whether the shares are actively traded or not.

Suggested Citation

  • Mohammad M. Omran & John Pointon, 2009. "Capital structure and firm characteristics: an empirical analysis from Egypt," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 8(4), pages 454-474, October.
    • Handle: RePEc:eme:rafpps:v:8:y:2009:i:4:p:454-474
    DOI: 10.1108/14757700911006976
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    References listed on IDEAS

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    2. Stavros H. Arvanitis & Irakleia S. Tzigkounaki & Theodoros V. Stamatopoulos & Eleftherios I. Thalassinos, 2012. "Dynamic Approach of Capital Structure of European Shipping Companies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 5(3), pages 33-63, December.
    3. Muhammad Ali Jibran Qamar & Umar Farooq & Hamayun Afzal & Waheed Akhtar, 2016. "Determinants of Debt Financing and Their Moderating Role to Leverage-Performance Relation: An Emerging Market Review," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(5), pages 300-311, May.
    4. Mazlina Mustapha Author_Email: mazlina05@gmail.com & Hashanah Bt Ismail & Badriyah Bt Minai, 2011. "Determinants Of Debt Structure: Empirical Evidence From Malaysia," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-490, Conference Master Resources.
    5. Ahmed Sakr & Amina Bedeir, 2019. "Firm Level Determinants of Capital Structure: Evidence From Egypt," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(1), pages 68-85, January.

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