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The Firm-specific Determinants of Capital Structure – An Empirical Analysis of Firms before and during the Euro Crisis

Author

Listed:
  • Amir Moradi

    (HAN - Hogeschool van Arnhem en Nijmegen)

  • Elisabeth Paulet

    (ICN Business School, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

Abstract

This paper intends to address the effects of firm-specific characteristics on the formation of capital structure amongst a balanced panel sample of 559 firms in six European countries before and during the period of 1999-2015. We find that growth, profitability, tax shields and the effects of the Euro Crisis are significantly negatively related to leverage plus debt-to-equity ratio and are significantly positively correlated with net equity. Additionally, we detect that size, asset tangibility, non-debt tax shields and earnings volatility are significantly positively correlated with leverage along with debt-to-equity ratio and have a significantly negatively relation with net equity. Our model tests the effectivity of trade-off, pecking order and agency cost theories of capital structure. Besides, we divide the full sample into three subsamples illustrating different industries of retail trade and services, manufacturing and construction plus transportation and tourism. We find that the transportation and tourism industry is more negatively impacted by the Euro Crisis than the other two industries.

Suggested Citation

  • Amir Moradi & Elisabeth Paulet, 2018. "The Firm-specific Determinants of Capital Structure – An Empirical Analysis of Firms before and during the Euro Crisis," Post-Print hal-01847918, HAL.
    • Handle: RePEc:hal:journl:hal-01847918
    DOI: 10.1016/j.ribaf.2018.07.007
    as

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