Capital Structure Decisions: Which Factors Are Reliably Important?
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No Canadian affiliation. An affiliation-only frame — the usual design — would never have seen this work. It is one of the works that make the case for inverting the frame.
Abstract
This paper examines the relative importance of many factors in the capital structure decisions of publicly traded American firms from 1950 to 2003. The most reliable factors for explaining market leverage are: median industry leverage (+ effect on leverage), market‐to‐book assets ratio (−), tangibility (+), profits (−), log of assets (+), and expected inflation (+). In addition, we find that dividend‐paying firms tend to have lower leverage. When considering book leverage, somewhat similar effects are found. However, for book leverage, the impact of firm size, the market‐to‐book ratio, and the effect of inflation are not reliable. The empirical evidence seems reasonably consistent with some versions of the trade‐off theory of capital structure.
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The record
- Venue
- Financial Management
- Topic
- Corporate Finance and Governance
- Field
- Business, Management and Accounting
- Canadian institutions
- —
- Funders
- Hong Kong University of Science and TechnologyQueen's UniversityTulane University
- Keywords
- Leverage (statistics)Capital structureDividendMonetary economicsEconomicsFinancial economicsBusinessEconometricsFinance
- Has abstract in OpenAlex
- yes