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How firm characteristics affect capital structure: an empirical study

Author

Listed:
  • Nikolaos Eriotis
  • Dimitrios Vasiliou
  • Zoe Ventoura-Neokosmidi

Abstract

Purpose - The aim of this study is to isolate the firm characteristics that affect capital structure. Design/methodology/approach - The investigation has been performed using panel data procedure for a sample of 129 Greek companies listed on the Athens Stock Exchange during 1997-2001. The number of the companies in the sample corresponds to the 63 per cent of the listed firms in 1996. The firm characteristics are analyzed as determinants of capital structure according to different explanatory theories. The hypothesis that is tested in this paper is that the debt ratio at time Findings - The findings of this study justify the hypothesis that there is a negative relation between the debt ratio of the firms and their growth, their quick ratio and their interest coverage ratio. Size appears to maintain a positive relation and according to the dummy variable there is a differentiation in the capital structure among the firms with a debt ratio greater than 50 per cent and those with a debt ratio lower than 50 per cent. These results are consistent with the theoretical background presented in the second section of the paper. Originality/value - This paper goes someway to proving that financial theory does provide some help in understanding how the chosen financing mix affects the firm's value.

Suggested Citation

  • Nikolaos Eriotis & Dimitrios Vasiliou & Zoe Ventoura-Neokosmidi, 2007. "How firm characteristics affect capital structure: an empirical study," Managerial Finance, Emerald Group Publishing, vol. 33(5), pages 321-331, April.
  • Handle: RePEc:eme:mfipps:v:33:y:2007:i:5:p:321-331
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    Citations

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    Cited by:

    1. Karartı, Tuncay, 2014. "Impact of ownership structure on leverage of non-financial firms in developing countries," MPRA Paper 61483, University Library of Munich, Germany.
    2. San Martín, Pablo & Saona, Paolo, 2017. "Capital structure in the Chilean corporate sector: Revisiting the stylized facts," Research in International Business and Finance, Elsevier, vol. 40(C), pages 163-174.
    3. Apostolos Dasilas & Nicolas Papasyriopoulos, 2015. "Corporate governance, credit ratings and the capital structure of Greek SME and large listed firms," Small Business Economics, Springer, vol. 45(1), pages 215-244, June.
    4. Akdal, Sinan, 2010. "How do Firm Characteristics Affect Capital Structure? Some UK Evidence," MPRA Paper 29199, University Library of Munich, Germany.
    5. Abdalla Geth Abdussalam, 2017. "Exploring the Relationship between Working Capital Management, Profitability and Capital Structure," GATR Journals afr126, Global Academy of Training and Research (GATR) Enterprise.
    6. repec:rss:jnljef:v3i2p4 is not listed on IDEAS
    7. Demircioğlu, Emre, 2014. "Organization performance and happiness in the context of leadership behavior (case study base on psychological well-beings)," MPRA Paper 61484, University Library of Munich, Germany.
    8. Wan Mohd Nazri Wan Daud & Norlia Mat Norwani & Anizawati Ahmad Mansor & Wan Anisah Endut, 2016. "Does Financing Decision Influence Corporate Performance in Malaysia?," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1165-1171.
    9. Stavros H. Arvanitis & Irakleia S. Tzigkounaki & Theodoros V. Stamatopoulos & Eleftherios I. Thalassinos, 2012. "Dynamic Approach of Capital Structure of European Shipping Companies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 5(3), pages 33-63, December.
    10. Suhaila, Mat Kila & Wan Mahmood, Wan Mansor, 2008. "Capital Structure and Firm Characteristics: Some Evidence from Malaysian Companies," MPRA Paper 14616, University Library of Munich, Germany.
    11. Felix Babatunde Dada & Ben Ukaegbu, 2015. "The Pecking Order Theory: Evidence from Listed Firms in Nigeria," International Finance and Banking, Macrothink Institute, vol. 2(2), pages 72-84, December.
    12. Abdulkadir Ali Tifow & Ozlem Sayilir, 2015. "Capital Structure and Firm Performance: An Analysis of Manufacturing Firms in Turkey," Eurasian Journal of Business and Management, Eurasian Publications, vol. 3(4), pages 13-22.

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