Skip to main content
×
Home

Capital Structure Decisions around the World: Which Factors Are Reliably Important?

  • Özde Öztekin (a1)
Abstract
Abstract

This article examines the international determinants of capital structure using a large sample of firms from 37 countries. The reliable determinants for leverage are firm size, tangibility, industry leverage, profits, and inflation. The quality of the countries’ institutions affects leverage and the adjustment speed toward target leverage in significant ways. High-quality institutions lead to faster leverage adjustments, whereas laws and traditions that safeguard debt holders relative to stockholders (e.g., more effective bankruptcy procedures and stronger creditor protection) lead to higher leverage.

    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      Capital Structure Decisions around the World: Which Factors Are Reliably Important?
      Available formats
      ×
      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your Dropbox account. Find out more about sending content to Dropbox.

      Capital Structure Decisions around the World: Which Factors Are Reliably Important?
      Available formats
      ×
      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your Google Drive account. Find out more about sending content to Google Drive.

      Capital Structure Decisions around the World: Which Factors Are Reliably Important?
      Available formats
      ×
Copyright
Corresponding author
*Corresponding author: ooztekin@fiu.edu
References
Hide All
Acemoglu D., and Johnson S.. “Unbundling Institutions.” Journal of Political Economy, 113 (2005), 949995.
Acemoglu D.; Johnson S.; and Robinson J. A.. “The Colonial Origins of Comparative Development: An Empirical Investigation.” American Economic Review, 91 (2001), 13691401.
Acemoglu D.; Johnson S.; and Robinson J. A.. “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution.” Quarterly Journal of Economics, 117 (2002), 12311294.
Antoniou A.; Guney Y.; and Paudyal K.. “The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions.” Journal of Financial and Quantitative Analysis, 43 (2008), 5992.
Bae K., and Goyal V. K.. “Creditor Rights, Enforcement, and Bank Loans.” Journal of Finance, 64 (2009), 823860.
Baker M., and Wurgler J.. “Market Timing and Capital Structure.” Journal of Finance, 57 (2002), 132.
Beck T.; Demirgüç-Kunt A.; and Levine R.. “A New Database on Financial Development and Structure.” World Bank Economic Review, 14 (2000), 597605.
Bhattacharya U., and Daouk H.. “The World Price of Insider Trading.” Journal of Finance, 57 (2002), 75108.
Blundell R., and Bond S.. “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models.” Journal of Econometrics, 87 (1998), 115143.
Booth L.; Aivazian V.; Demirgüç-Kunt A.; and Maksimovic V.. “Capital Structure in Developing Countries.” Journal of Finance, 56 (2001), 87130.
Demirgüç-Kunt A., and Maksimovic V.. “Institutions, Financial Markets, and Firm Debt Maturity.” Journal of Financial Economics, 54 (1999), 295336.
Djankov S.; Hart O.; McLiesh C.; and Shleifer A.. “Debt Enforcement Around the World.” Journal of Political Economy, 116 (2008), 11051150.
Djankov S.; La Porta R.; Lopez-de-Silanes F.; and Shleifer A.. “The Regulation of Entry.” Quarterly Journal of Economics, 1 (2002), 137.
Djankov S.; La Porta R.; Lopez-de-Silanes F.; and Shleifer A.. “Courts.” Quarterly Journal of Economics, 118 (2003), 453517.
Djankov S.; La Porta R.; Lopez-de-Silanes F.; and Shleifer A.. “The Law and Economics of Self-Dealing.” Journal of Financial Economics, 88 (2008), 430465.
Djankov S.; McLiesh C.; and Shleifer A.. “Private Credit in 129 Countries.” Journal of Financial Economics, 84 (2007), 299329.
Fama F. E., and French K. R.. “Industry Costs of Equity.” Journal of Financial Economics, 43 (1997), 153193.
Fan J. P. H.; Titman S.; and Twite G. J.. “An International Comparison of Capital Structure and Debt Maturity Choices.” Journal of Financial and Quantitative Analysis, 47 (2012), 2356.
Faulkender M. W.; Flannery M. J.; Hankins K. W.; and Smith J. M.. “Cash Flows and Leverage Adjustments.” Journal of Financial Economics, 103 (2012), 632646.
Flannery M. J., and Hankins K. W.. “Estimating Dynamic Panel Models in Corporate Finance.” Journal of Corporate Finance, 19 (2013), 119.
Flannery M. J., and Rangan K. P.. “Partial Adjustment Toward Target Capital Structures.” Journal of Financial Economics, 79 (2006), 469506.
Frank M. Z., and Goyal V. K.. “Capital Structure Decisions: Which Factors Are Reliably Important?” Financial Management, 38 (2009), 137.
Frank M. Z., and Goyal V. K.. “The Profits–Leverage Puzzle Revisited.” Review of Finance, forthcoming (2015).
Graham J. R. “Debt and the Marginal Tax Rate.” Journal of Financial Economics, 41 (1996), 4173.
Graham J. R., and Harvey C.. “The Theory and Practice of Corporate Finance: Evidence from the Field.” Journal of Financial Economics, 60 (2001), 187243.
Gungoraydinoglu A., and Öztekin Ö.. “Firm- and Country-Level Determinants of Corporate Leverage: Some New International Evidence.” Journal of Corporate Finance, 17 (2011), 14571474.
Hail L., and Leuz C.. “International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?” Journal of Accounting Research, 44 (2006), 485531.
Heaton J. B. “Managerial Optimism and Corporate Finance.” Financial Management, 31 (2002), 3345.
Hovakimian A.; Opler T.; and Titman S.. “The Debt-Equity Choice.” Journal of Financial and Quantitative Analysis, 36 (2001), 124.
Huang R., and Ritter J.. “Testing Theories of Capital Structure and Estimating the Speed of Adjustment.” Journal of Financial and Quantitative Analysis, 44 (2009), 237271.
Jensen M. C. “Agency Costs of Free Cash Flows, Corporate Finance and Takeovers.” American Economic Review, 76 (1986), 323339.
Jensen M. C., and Meckling W. H.. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics, 3 (1976), 305360.
La Porta R.; Lopez-de-Silanes F.; and Shleifer A.. “What Works in Securities Laws?” Journal of Finance, 61 (2006), 132.
La Porta R.; Lopez-de-Silanes F.; Shleifer A.; and Vishny R. W.. “Legal Determinants of External Finance.” Journal of Finance, 52 (1997), 11311150.
La Porta R.; Lopez-de-Silanes F.; Shleifer A.; and Vishny R. W.. “Law and Finance.” Journal of Political Economy, 106 (1998), 11131155.
Lemmon M. L.; Roberts M. R.; and Zender J. F.. “Back to the Beginning: Persistence and the Cross-Section of Corporate Capital Structure.” Journal of Finance, 63 (2008), 15751608.
Levine R. “Law, Finance and Economic Growth?” Journal of Financial Intermediation, 8 (1999), 835.
Liu L. X. “Historical Market-to-Book in a Partial Adjustment Model of Leverage.” Journal of Corporate Finance, 15 (2009), 602612.
Myers S. C. “Determinants of Corporate Borrowing.” Journal of Financial Economics, 5 (1977), 147175.
Myers S. C. “The Capital Structure Puzzle.” Journal of Finance, 39 (1984), 575592.
Myers S. C., and Majluf N.. “Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have.” Journal of Financial Economics, 13 (1984), 187224.
Öztekin Ö., and Flannery M. J.. “Institutional Determinants of Capital Structure Adjustment Speeds.” Journal of Financial Economics, 103 (2012), 88112.
Pagan B. “Econometric Issues in the Analysis of Regressions with Generated Regressors.” International Economic Review, 25 (1984), 221247.
Qian J., and Strahan P. E.. “How Laws and Institutions Shape Financial Contracts: The Case of Bank Loans.” Journal of Finance, 62 (2007), 28032834.
Rajan R. G., and Zingales L.. “What Do We Know about Capital Structure? Some Evidence from International Data.” Journal of Finance, 50 (1995), 14211460.
Ritter J. R., and Warr R. S.. “The Decline of Inflation and the Bull Market of 1982–1999.” Journal of Financial and Quantitative Analysis, 37 (2002), 2961.
Stiglitz J., and Weiss A.. “Credit Rationing in Markets with Imperfect Information.” American Economic Review, 71 (1981), 393410.
Strebulaev I. A. “Do Tests of Capital Structure Theory Mean What They Say?” Journal of Finance, 62 (2007), 17471787.
Stulz R. M. “Managerial Discretion and Optimal Financing Policies.” Journal of Financial Economics, 26 (1990), 327.
Verrecchia R. E. “Essays of Disclosure.” Journal of Accounting and Economics, 32 (2001), 97180.
Warr R. S.; Elliott W. B.; Koëter-Kant J.; and Öztekin Ö.. “Equity Mispricing and Leverage Adjustment Costs.” Journal of Financial and Quantitative Analysis, 47 (2012), 589616.
Welch I. “Two Common Problems in Capital Structure Research: The Financial-Debt-to-Asset Ratio and Issuing Activity versus Leverage Changes.” International Review of Finance, 11 (2011), 117.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 8
Total number of PDF views: 1804 *
Loading metrics...

Abstract views

Total abstract views: 2014 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 21st November 2017. This data will be updated every 24 hours.