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Determinants of Capital Structure in Non-Financial Companies

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  • Kühnhausen, Fabian
  • Stieber, Harald W.

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.

Suggested Citation

  • Kühnhausen, Fabian & Stieber, Harald W., 2014. "Determinants of Capital Structure in Non-Financial Companies," Discussion Papers in Economics 21167, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:21167
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    References listed on IDEAS

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    2. Martinez Cillero, Maria & Lawless, Martina & O'Toole, Conor, 2019. "The determinants of SME capital structure across the lifecycle," Papers WP614, Economic and Social Research Institute (ESRI).
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    4. Nicolas Griesshaber, 2017. "Towards a more comprehensive understanding of corporate leverage ratios," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Uses of central balance sheet data offices' information, volume 45, Bank for International Settlements.
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    More about this item

    Keywords

    Capital Structure; Non-Financial Companies; Pecking Order Theory; Trade-off Theory;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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