Fundamental Drivers of Capital Structure: Evidence from Publicly Traded Non-financial U.S. Firms

Meskat Ibne Sharif
Additional contact information
Meskat Ibne Sharif: MSc. (Financial Economics) Student, Otto von Guericke University Magdeburg, Universit tsplatz 2, 39106 Magdeburg, Germany.

International Journal of Economics and Financial Issues, 2019, vol. 9, issue 6, 113-122

Abstract: This paper investigates the influence of relevant factors in determining capital structure with their respective extent. Excluding financial firms, all publicly traded American firms for the period of 1950-2005 are considered as the sample firms. Five fundamental factors that may explain leverage are growth opportunities, tangible assets, firm profit, firm size, and inflation. I use simple linear regression, BIC, and AIC, to identify the reliably consistent influential factors and a model. Using total leverage to market value of asset (TLMA) as my main model for the entire estimation period (1950-2005), I find that tangibility and firm size are significantly and positively related to leverage. The growth opportunities is also positively related to leverage but statistically insignificant. But firm profit has a significant negative relationship with leverage confirming the implication of the pecking order hypothesis.

Keywords: static trade-off theory; pecking order theory; market timing theory; signaling theory; agency cost theory (search for similar items in EconPapers)
JEL-codes: G1 G10 G20 G3 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econjournals.com/index.php/ijefi/article/download/8663/pdf (application/pdf)
https://www.econjournals.com/index.php/ijefi/article/view/8663/pdf (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:eco:journ1:2019-06-14

Access Statistics for this article

International Journal of Economics and Financial Issues is currently edited by Ilhan Ozturk

More articles in International Journal of Economics and Financial Issues from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().