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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
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    2. Georgeta Vintilă & Ştefan Cristian Gherghina & Diana Alexandra Toader, 2019. "Exploring the Determinants of Financial Structure in the Technology Industry: Panel Data Evidence from the New York Stock Exchange Listed Companies," JRFM, MDPI, vol. 12(4), pages 1-16, October.
    3. Bhattacherjee, Purba & Mishra, Sibanjan, 2025. "Oil shocks and capital structure: Role of ESG across the globe," International Review of Economics & Finance, Elsevier, vol. 99(C).
    4. Lee, Lillian & Chowdhury, Anup & Shubita, Moade, 2023. "Impact of Paris Agreement on financing strategy: Evidence from global FPSO industry," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    5. Zhang, Dongyang, 2021. "Is export tax rebate a quality signal to determine firms’ capital structure? A financial intermediation perspective," Research in International Business and Finance, Elsevier, vol. 55(C).
    6. Vega-Gutierrez, Pedro Luis & López-Iturriaga, Félix J. & Rodriguez-Sanz, Juan Antonio, 2021. "Labour market conditions and the corporate financing decision: A European analysis," Research in International Business and Finance, Elsevier, vol. 58(C).
    7. Morais, Flávio & Serrasqueiro, Zélia & Ramalho, Joaquim J.S., 2020. "The zero-leverage phenomenon: A bivariate probit with partial observability approach," Research in International Business and Finance, Elsevier, vol. 53(C).
    8. Abdullah, Hariem & Tursoy, Turgut, 2021. "Capital structure and firm performance: a panel causality test," MPRA Paper 105871, University Library of Munich, Germany.
    9. Moncef Guizani, 2020. "Testing the pecking order theory of capital structure: the case of Islamic financing modes," Future Business Journal, Springer, vol. 6(1), pages 1-12, December.
    10. Madaleno Mara & Bărbuţă-Mişu Nicoleta, 2019. "The Financial Performance of European Companies: Explanatory Factors in the Context of Economic Crisis," Ekonomika (Economics), Sciendo, vol. 98(2), pages 6-18, December.
    11. Suleiman A. Badayi & Bolaji T. Matemilola & Bany‐Ariffin A.N & Lau Wei Theng, 2021. "Does corporate social responsibility influence firm probability of default?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3377-3395, July.

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    Keywords

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    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L8 - Industrial Organization - - Industry Studies: Services
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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