Institutional, Macroeconomic and Firm-Specific Determinants of Capital Structure: The African Evidence
Management Research Review, 2013, Volume 36, No. 10
Posted: 20 Oct 2011 Last revised: 25 Dec 2012
Date Written: April 20, 2011
Abstract
The aim of this study is to empirically investigate the role of firm- industry-, institutional-, and macroeconomic-factors on a firm’s capital structure decision in the context of nine African countries. To this end, we consider a sample of 986 non-financial firms over a period of 10 years (1999-2008) and specify a range of models that link firm-, industry-, institutional-, and macroeconomic variables with varying measures of leverage. A battery of econometric procedures including Generalized Method of Moments and Seemingly Unrelated regression was used to estimate the relationship between the variables and provide robustness check. We document that: leverage is positively affected by firm size while it is inversely related with profitability; the effect of asset tangibility, non-debt-related tax shield and dividend payout on leverage is dependent on how the latter is defined; there is inter-industry variation in capital structure decision of African firms; income level of host countries moderates the influence of firm-specific factors on capital structure decisions; and legal and financial institutions and macroeconomic conditions do matter in the capital structure decisions of African firms.
Keywords: capital structure, determinants, Africa
JEL Classification: G1, G15, G2, G20, G3, G32, G34
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