The Capital Structure Choice of European Firms: The Role of Financial System and Institutional Setting

Daniela Venanzi and Alessia Naccarato

International Business Research, 2017, vol. 10, issue 12, 22-47

Abstract: Recent international financial research finds that a firm’s capital structure is not only influenced by firm- and industry-specific determinants, but also by country-specific factors. Starting from the last decade’s studies on the country effect and addressing some areas of potential development in empirical testing, we test, on a sample of seven apparently similar European countries and more than 800,000 variously sized firms (from the BACH-ESD database) over a ten year period (2000-2009), the direct effects of country characteristics on leverage, as well as their mediating role on the effects of firm- and industry-specific determinants, by using a simultaneous equation model (SEM) never used before by any scholar in this field. The emerging empirical evidence: i) highlights the relevance of many institutional, financial, and macroeconomic country characteristics; ii) confirms the better ability of banks in selecting, monitoring, and financing small and risky firms; iii) shows that the demand-side perspective can better explain some counter-intuitive effects of some determinants on leverage.

Keywords: capital structure; country characteristics; financial systems; institutional setting; European countries; empirical study (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ccsenet.org/journal/index.php/ibr/article/view/70794/39108 (application/pdf)
http://www.ccsenet.org/journal/index.php/ibr/article/view/70794 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibn:ibrjnl:v:10:y:2017:i:12:p:22-47

Access Statistics for this article

More articles in International Business Research from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education ().