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A Dynamic Econometric Modelling of the Determinants of Capital Structure of Listed Companies- A Mauritian Perspective

Author

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  • Dharveshsingh Gourdeale
  • Virendra Polodoo

Abstract

The gist of this paper is to empirically assess the determinants of capital structure decisions for 29 listed firms on the Stock Exchange of Mauritius for the period spanning 2006-2014. The paper employs the random coefficient estimation, deemed to be a novelty in the econometric literature to test for the dynamism of the model. According to the random coefficient estimates, the important determinants of leverage in Mauritius are profitability, liquidity, tangibility, growth opportunities and size. Business risk and age do not appear to have any significant effect on capital structure. The findings of the study offer several implications for policy making. Government policies aimed at developing the domestic bond market would be welcome as Mauritian firms face a shortage of funding options and heavy reliance on short term debt. Further governmental plans to boost the fluidity of equity issues and to reduce the associated costs are also advocated.

Suggested Citation

  • Dharveshsingh Gourdeale & Virendra Polodoo, 2016. "A Dynamic Econometric Modelling of the Determinants of Capital Structure of Listed Companies- A Mauritian Perspective," Applied Economics and Finance, Redfame publishing, vol. 3(3), pages 117-126, August.
    • Handle: RePEc:rfa:aefjnl:v:3:y:2016:i:3:p:117-126
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    References listed on IDEAS

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    7. Agarwal, Sumit & Mohtadi, Hamid, 2004. "Financial markets and the financing choice of firms: Evidence from developing countries," Global Finance Journal, Elsevier, vol. 15(1), pages 57-70.
    8. AVIRAL Kumar Tiwari & RAVEESH Krishnankutty, 2015. "Determinants Of Capital Structure: A Quantile Regression Analysis," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 10(1), pages 16-34, April.
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    Cited by:

    1. Rishi Kapoor Ronoowah & Boopendra Seetanah, 2023. "Corporate governance, capital structure, and firm performance: a panel VAR approach," SN Business & Economics, Springer, vol. 3(1), pages 1-30, January.

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    More about this item

    Keywords

    capital structure; dynamism; random coefficient estimation; determinants of leverage;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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