IDEAS home Printed from https://ideas.repec.org/a/ids/ijecbr/v8y2014i1p93-124.html
   My bibliography  Save this article

Firm-specific, industry-wide and country-wide determinants of corporate capital structure

Author

Listed:
  • Tarek Ibrahim Eldomiaty
  • Ahmed Badawy
  • Ahmed Fikri

Abstract

This study examines the relative speed of adjustments of debt ratios and explanatory powers of three groups of determinants of capital structure: firm-specific, country-wide and industry-wide. The sample includes non-financial firms listed in the DJIA and NASDAQ for quarterly periods 1992-2010. For industry-wide variables, the results show that the prospects of many products in the industry call for higher debt ratios. For the effects of country-wide variables, a positive relationship exists between unemployment rates and debt ratios, constituting a warning signal that excessive use of debt financing adds to unemployment problems. In addition, the negative relationship between inflation and debt financing indicates that when inflation rises, firms prefer equity financing to avoid increasing interest burdens on earnings. A positive relationship also exists between debt financing and productivity growth, exports and unemployment rate growth. The comparative effect between firm-specific, industry-wide and country-wide variables shows that firms characterised by high debt ratios are much more influenced by assumptions of the theories of capital structure and macro variables than firms characterised by low debt.

Suggested Citation

  • Tarek Ibrahim Eldomiaty & Ahmed Badawy & Ahmed Fikri, 2014. "Firm-specific, industry-wide and country-wide determinants of corporate capital structure," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 8(1), pages 93-124.
    • Handle: RePEc:ids:ijecbr:v:8:y:2014:i:1:p:93-124
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=63943
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijecbr:v:8:y:2014:i:1:p:93-124. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=310 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.