How do Firm Characteristics Affect Capital Structure? Some UK Evidence.
AbstractThis study aims to determine the influence of various firm level characteristics such as, profitability, size, growth opportunities, asset tangibility, non-debt tax shield, volatility and liquidity on capital structure. Employing the cross-sectional data methodology, the researcher examines the capital structure determinants of 202 companies from FTSE 250 for the time period of 2002 – 2009. Seven variables multiple regression models are used to estimate the influence of firm level attributes on capital structure and capital structure is measured simultaneously by the ratios of total debt, long-term debt and short-term debt at both book value and market value of equity. The results obtained from four different regression models show that profitability and liquidity are negatively and significantly related to leverage. Also asset tangibility has a positive relationship with leverage, which is significant. Moreover the researcher finds that total debt ratio at market value of equity is the most important dependent variable as a proxy of capital structure, followed by long-term debt ratio at market value of equity.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 29657.
Date of creation: 04 Oct 2010
Date of revision: 01 Nov 2010
Capital structure; leverage; capital structure determinants; firm level characteristics; profitability; size; growth opportunities; asset tangibility; non-debt tax shield; volatility; liquidity;
Other versions of this item:
- Akdal, Sinan, 2010. "How do Firm Characteristics Affect Capital Structure? Some UK Evidence," MPRA Paper 29199, University Library of Munich, Germany.
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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