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Corporate Capital Structure Determinants: Evidence from Five African Countries

Author

Listed:
  • Kalu Ojah
  • Tendai Gwatidzo

    () (University of the Witwatersrand)

Abstract

Using a panel of listed firms in Ghana, Kenya, Nigeria, South Africa and Zimbabwe, we investigate corporate capital structure in Africa, with emphasis on the extent to which firm characteristics and cross-country institutional differences determine the way firms raise capital. Results indicate that firms in Africa are about as leveraged as firms in emerging economies such as Mexico, Thailand, Brazil, South Korea, Malaysia and Turkey. African firms tend to rely heavily on internal finance, and where they use external finance, they choose mostly short-term debt to fund their production activity – indicating some support for the pecking-order postulate. Moreover, firms’ profitability, size, asset tangibility and age, relate significantly to leverage; thus suggesting that remedies for inadequate institutional infrastructures are important determinants of corporate capital structure in Africa.

Suggested Citation

  • Kalu Ojah & Tendai Gwatidzo, 2009. "Corporate Capital Structure Determinants: Evidence from Five African Countries," The African Finance Journal, Africagrowth Institute, vol. 11(1), pages 1-23.
  • Handle: RePEc:afj:journl:v:11:y:2009:i:1:p:1-23
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    Cited by:

    1. repec:bla:rdevec:v:21:y:2017:i:3:p:849-873 is not listed on IDEAS
    2. Gwatidzo, Tendai & Ojah, Kalu, 2014. "Firms’ debt choice in Africa: Are institutional infrastructure and non-traditional determinants important?," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 152-166.

    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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