The Determinants of Corporate Leverage: A Panel Data Analysis
AbstractWidespread increases in corporate leverage occurred over the 1980s in Australia. There was also considerable variation in leverage across firms. This paper uses a sample of 209 firms, observed annually between 1973 and 1991, to explore both cross-sectional and time variation in financial structure. The paper begins with a survey of the literature on corporate financial structure. This leads to a model that incorporates the major determinants of leverage. The empirical model takes into account the influence of both firm-specific and time-specific effects. The dynamics of leverage are also tentatively explored. The results suggest that a number of firm-related factors influence the relative costs of debt, the level of demand for and the availability of funds. Most important among these are firm size, growth, collateral and cash flow. A number of macro-economic variables are also found to influence leverage. Most important among these are real asset prices which play a significant role in the post-financial deregulation period.
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Bibliographic InfoPaper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9313.
Date of creation: Dec 1993
Date of revision:
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- Dimiter Rafailov, 2003. "Determinants of the capital structure of the Bulgarian firms," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 47-65.
- Bülent, Köksal & Cüneyt, Orman & Arif, Oduncu, 2013. "Determinants of Capital Structure: Evidence from a Major Emerging Market Economy," MPRA Paper 48415, University Library of Munich, Germany.
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