Capital structure determinants: an empirical study in a growing economy of the emerging market

Naseem Ahamed and Nitya Nand Tripathi

International Journal of Economics and Business Research, 2016, vol. 12, issue 3, 216-232

Abstract: This study determines the variables influencing capital structure of firms. Firms would adapt themselves according to the economy and formulate a capital structure that would maximise their shareholder wealth. A total of 11,341 firm years from the year 2000 to 2015 are taken. This study reviews various theories (trade off theory, agency theory, pecking order theory) of capital structure. The results of this study suggest that profitability, non-debt tax shield, growth opportunity, liquidity and age of firm are negative and significant whereas size, assets tangibility is positive significant impact on the capital structure of firms. The findings allude to the reinforcement of pecking order theory which leads to establish that capital structure models forged in developed countries. It would be a helpful reference to managers/executives responsible for designing the capital structure of a company in such a corporate environment which can help to achieve the objective of shareholder's wealth maximisation.

Keywords: capital structure; emerging markets; alternative regression function forms; trade off theory; agency theory; pecking order theory; profitability; non-debt tax shield; growth opportunity; liquidity; firm age; firm size; asset tangibility; shareholder wealth. (search for similar items in EconPapers)
Date: 2016
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