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International capital structure differences among the G7 nations: a current empirical view

Author

Listed:
  • Kenneth Mcclure
  • Ronnie Clayton
  • Richard Hofler

Abstract

Historical research domestically and internationally suggests that differences in capital structures exist for industry classification, firm size and nationality. However, the data for most of these previous studies are based on book values, include a limited number of countries, are not up-to-date, and specifically do not cover the period of the late 1980s when there were important developments in the globalization of financial markets. In addition, no single study specifically compares all seven of the world's major industrial nations (G7 Nations). Financial theory would suggest that in an efficient global market the capital structure of identical firms in different nations would be the same. If international market imperfections still exist through the 1980s, current capital structures and costs may be different among similar firms in different nations; and business advantages (or disadvantages) may provide profits (or costs) to firms incorporated in different countries. The intent of this research is empirically to update the literature with recent international data on both a book value and market value basis and to include for the first time in a single study all the G7 Nations. The results suggest significant financial structure differences still exist among the G7 countries. Specifically, on a market value basis France, Italy and Germany tend to use a higher proportion of total debt, US, UK, Canada and Japan tend to use less debt, and France, Italy and Canada tend to use a higher proportion of institutional debt (non-spontaneous funds) than the US, UK, Japan and Germany.

Suggested Citation

  • Kenneth Mcclure & Ronnie Clayton & Richard Hofler, 1999. "International capital structure differences among the G7 nations: a current empirical view," The European Journal of Finance, Taylor & Francis Journals, vol. 5(2), pages 141-164.
  • Handle: RePEc:taf:eurjfi:v:5:y:1999:i:2:p:141-164
    DOI: 10.1080/135184799337145
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mohammad M. Omran & John Pointon, 2009. "Capital structure and firm characteristics: an empirical analysis from Egypt," Review of Accounting and Finance, Emerald Group Publishing, vol. 8(4), pages 454-474, October.
    2. Balla, Andrea, 2006. "Tőkeszerkezeti döntések - empirikus elemzés a magyar feldolgozóipari vállalatokról 1992-2001 között
      [Decisions affecting capital structure - an empirical analysis of Hungarian manufacturing firms i
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 681-700.
    3. Delcoure, Natalya, 2007. "The determinants of capital structure in transitional economies," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 400-415.

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