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Corporate Capital Structure Choices In Mena: Empirical Evidence From Non-Listed Firms In Morocco

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  • LAHCEN ACHY

    ()
    (Institut National de Statistique et d'Economie Appliquée (INSEA), BP 6217 Rabat Institutes, Rabat, Morocco)

Abstract

Based on their perceptions, more than three quarters of Moroccan manufacturing firms have identified access to finance as one of the major constraints affecting their performance. However, compared to a number of emerging countries, Moroccan firms appear relatively undercapitalized and more reliant on external finance. These two findings seem contradictory and have very different policy implications. The purpose of this paper is to provide a rigorous understanding of the rationale behind financial choices made by Moroccan firms, and assess the severity of financial constraints they effectively face. The paper uses a panel dataset covering 550 non-listed manufacturing firms over the period 1998ȓ2003 and investigates both long-term and short-term measures of leverage with the objective of understanding the factors that shape "debt-equity choice" as well as "debt maturity structure".Our analysis reveals the existence of a negative relationship between asset tangibility and both aggregate leverage and short-term debt ratio. However, no clear cut relationship between asset tangibility and long-term debt is uncovered. Small firms tend to increase their debt instead of opening their capital to outside investors and larger firms seem to rely much more on their retained earnings for their long-term financial needs. For short-term debt, size does not appear to matter. The impact of growth is positive on short-term leverage and irrelevant for long-term leverage. Finally, profitability exerts a positive effect on long-term leverage and a negative one on short-term leverage.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Middle East Development Journal.

Volume (Year): 01 (2009)
Issue (Month): 02 ()
Pages: 255-273

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Handle: RePEc:wsi:medjxx:v:01:y:2009:i:02:p:255-273

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Related research

Keywords: Financial structure; debt-equity choice; debt maturity issue; manufacturing firms;

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Cited by:
  1. Majumdar, Raju, 2012. "The Determinants of Indebtedness in Unlisted Manufacturing Firms in India: A Panel Data Analysis," MPRA Paper 43427, University Library of Munich, Germany.
  2. Hunjra, Ahmed Imran & Niazi, Ghulam Shabbir Khan & Akbar, Syed Waqar & Rehman, Kashif-Ur-, 2011. "Application of finance techniques: an empirical analysis of pakistani corporate sector," MPRA Paper 40675, University Library of Munich, Germany.

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