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Were Modern Capital Structure Theories Valid in Belgium Before World War I?


  • Marc Deloof
  • Wouter Van Overfelt


This study investigates whether modern theories can explain capital structure in a historical environment which was characterized by poor investor protection, booming stock markets and strong banks, and in which taxes did not affect leverage. Our results, based on a unique, hand‐collected sample of 556 firm‐year observations for 129 listed companies in Belgium before World War I, are remarkably similar to findings for present‐day samples. Leverage was positively related to asset tangibility, firm size and firm age, and it was negatively related to profitability and prior stock returns. Bank relationships were associated with lower leverage.

Suggested Citation

  • Marc Deloof & Wouter Van Overfelt, 2008. "Were Modern Capital Structure Theories Valid in Belgium Before World War I?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(3‐4), pages 491-515, April.
  • Handle: RePEc:bla:jbfnac:v:35:y:2008:i:3-4:p:491-515
    DOI: 10.1111/j.1468-5957.2008.02080.x

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    Cited by:

    1. Gregg, Amanda & Nafziger, Steven, 2020. "Financing nascent industry : Leverage, politics, and performance in Imperial Russia," BOFIT Discussion Papers 7/2020, Bank of Finland, Institute for Economies in Transition.
    2. Amanda Gregg & Steven Nafziger, 2019. "Capital structure and corporate performance in late Imperial Russia," European Review of Economic History, Oxford University Press, vol. 23(4), pages 446-481.

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