Viewed retrospectively since the work of Modigliani and Miller (M&M, 1958), the capital structure still remains a matter of study. The capital structure issue then is examined from different perspectives, and thus intertwining firms and macroeconomic determinants. Studies were focused to examine the relationship between leverage ratios and macroeconomic environment. Motivated from what was done earlier, we try to bring in this study evidence as well. Thus, totally 49 Ukrainian firms are selected and data are examined from 2012 to 2016. The paper is aimed at studying the process of leverage adjusting by examining five firm’s characteristics and three macroeconomic determinants. We found that leverage is influenced significantly from both, firm characteristics and macroeconomic determinants. The study provides evidence those firms with higher tax shield, tangibility, net trade credit, and profitability used more leverage than counterparties. Firm’s size and inflation are confirmed as insignificant determinants. On the other hand, GDP growth rate and default spread are confirmed to play a role on leverage policies.
If the inline PDF is not rendering correctly, you can download the PDF file here.
Ang J.S. Chua J.H. McConnell J.J. (1982) The administrative costs of corporate bankruptcy: a note. The Journal of Finance Vol. 37 no. 1 pp. 219–226.
Arellano M. and Bond S. (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies Vol. 58 no. 2 pp. 277-297.
Artikis P. G. & Nifora G. (2012) Capital structure macroeconomic variables & stock returns. Evidence from Greece International Advances in Economic Research Vol. 12 pp. 87–101. http://dx.doi.org/10.1007/s11294-011-9334-z
Barton S. L. & Gordon P. J. (1988) Corporate strategy and capital structure Strategic Management Journal Vol. 9 no. 6 pp. 623–632. http://dx.doi.org/10.1002/smj.4250090608
Bastos D. D. Nakamura W. T. & Basso L. F. C. (2009) Determinants of capital structure of publicly-traded companies in Latin America: the role of institutional and macroeconomic factors Journal of International Finance and Economics Vol. 9 no. 3 pp. 24–39.
Bauer P. (2004) Determinants of capital structure: Empirical evidence from Czech Republic. Czech Journal of Economics and Finance Vol. 54 no. 1-2 pp. 2–21.
Bevan A.A. Danbolt J. (2002) Capital structure and its determinants in the uk − a decompositional analysis. Applied Financial Economic Vol. 12 no. 3 pp. 159-170.
Bokpin G. A. (2009) Macroeconomic development and capital structure decisions of firms: evidence from emerging market economies Studies in Economics and Finance Vol. 26 no. 2 pp. 129–142. http://dx.doi.org/10.1108/10867370910963055
Booth L. Aivazian V. Demirguc-kunt A. Maksimovic V. (2001) Capital structures in developing countries The Journal of Finance Vol. 56 no. 1 pp. 78-130. https://doi.org/10.1111/0022-1082.00320
Brigham E. F. and Ehrhardt M.C. (2008): Financial Management: Theory and Practice. [12th Edition]. Mason OH USA: Thomson South-Western 1074 p.
Camara O. (2012) Capital structure adjustment speed and macroeconomic conditions: U.S. MNCs and DCs International Research Journal of Finance and Economics Vol. 84 pp. 106–120.
Daskalakis N. & Psillaki M. (2008) Do country or firm factors explain capital structure? Evidence from SMEs in France and Greece Applied Financial Economics Vol. 18 no. 1 pp. 87–97. http://dx.doi.org/10.1080/09603100601018864
Diamond D.W. (1989) Reputation acquisition in debt markets. Journal of Political Economy Vol. 97 no. 4 pp. 828–862.
Dincergok B. & Yalciner K. (2011) Capital structure decisions of manufacturing firms’ in developing countries Middle Eastern Finance and Economics Vol. 12 pp. 86–100.
Drobetz W. & Wanzenried G. (2006) What determines the speed of adjustment to the target capital structure?. Applied Financial Economics Vol. 16 no. 13 pp. 941-958.
Durand D. (1952): Costs of Debt and Equity Funds for Business: Trends and Problems of Measurement. Conference on Research in Business Finance 1952 National Bureau of Economic Research. NBER pp 215-262.
Frank M. Z. & Goyal V. K. (2009) Capital structure decisions: which factors are reliably important? Financial management Vol. 38 no. 1 pp. 1–37. http://dx.doi.org/10.1111/j.1755-053X.2009.01026.x
Friend I. Lang L.H.P. (1988) An empirical test of the impact of managerial self-interest on corporate capital structure. The Journal of Finance Vol. 43 no. 2 pp. 271–281.
Gajurel D. P. (2006). Macroeconomic influences on corporate capital structure available online at http://ssrn.com/abstract=899049 or http://dx.doi.org/10.2139/ssrn.899049
Hall G. Hutchinson P. & Michaelas N. (2000) Industry effects on the determinants of unquoted SMEs’ capital structure International Journal of the Economics of Business Vol. 7 no. 3 pp. 297–312. http://dx.doi.org/10.1080/13571510050197203
Hanousek J. & Shamshur A. (2011) A stubborn persistence: Is the stability of leverage ratios determined by the stability of the economy? Journal of Corporate Finance Vol. 17 pp. 1360–1376. http://dx.doi.org/10.1016/j.jcorpfin.2011.07.004
Harris M. Raviv A. (1991) The theory of capital structure. The Journal of Finance Vol. 46 no. 1 pp. 297–355.
Jensen M. C. Meckling W.H. (1976) Theory of the Firm: Managerial Behavior Agency Costs and Ownership Structure. Journal of Financial Economics. Vol. 3 no. 4. pp. 305-360.
Keshtkar R. Valipour H. & Javanmard A. (2012) Determinants of corporate capital structure under different debt maturities: empirical evidence from Iran International Research Journal of Finance and Economics Vol. 90 pp. 46–53.
Korajczyk R. A. & Levy A. (2003) Capital structure choice: macroeconomic conditions and financial constrains Journal of Financial Economics Vol. 68 no. 1 pp. 75–109. http://dx.doi.org/10.1016/S0304-405X(02)00249-0
Kouki M. & Said H. B. (2012) Capital structure determinants: new evidence from French panel data International Journal of Business and Management Vol. 7 no. 1 pp. 214–229.
Kraus A. A. Litzenberger R.H. (1973) State-Preference Model of Optimal Financial Leverage The Journal of Finance Vol. 28 no. 4 pp. 911-922.
La Porta R. Lopez-de-Silanes F. Shleifer A. Vishny R. (1998) Law and finance. Journal of Political Economy Vol. 106 no. 6 pp. 1113–1150.
La Rocca M. La Rocca T. Gerace D. Smark C. (2009) Effect of diversification on capital structure. Accounting Finance Vol. 49 no. 4 pp. 799–826.
Lim M T. C. (2012). Determinants of capital structure: empirical evidence from financial services listed firms in China International Journal of Economics and Finance Vol. 4 no. 3 pp. 191–203.
Michaelas N Chittenden F. & Poutzioris P. (1999) Financial policy and capital structure choice in U.K. SMEs: empirical evidence from company panel data Small Business Economics Vol. 12 no. 2 pp. 113–130. http://dx.doi.org/10.1023/A:1008010724051
Miller M. (1977) Debt and Taxes. The Journal of Finance Vol. 32 no. 2 pp. 261-275.
Modigliani F. Miller M. (1963) Corporate Income Taxes and the Cost of Capital: A Correction American Economic Review Vol. 53 no. 3 pp. 433-443.
Modigliani F. and Miller M.H. (1958) The Cost of Capital Corporation Finance and the Theory of Investment. American Economic Review Vol. 48 no. 3 pp. 261-297.
Myers S.C. Majluf N.S. (1984) Corporate Financing and Investment Decisions when Firms Have Information that Investors Do Not Have. Journal of Financial Economics Vol. 13 no. 3 pp. 187-221. https://doi.org/10.1016/0304-405X(84)90023-0
Myers S. (1977) Determinants of corporate borrowing. Journal of Financial Economics Vol. 5 no. 2 pp. 147–175.
Myers S.C. (1984) The capital structure puzzle. The Journal of Finance Vol. 39 no. 3 pp. 575–592.
Myers S.C. Rajan R.G. (1998) The paradox of liquidity. The Quarterly Journal of Economics Vol. 113 no. 3 pp. 733–771.
Nguyen Tho and Wu Jian (2011) Capital Structure Determinants and Convergence (January 6 2011). Bankers Markets and Investors forthcoming available online at SSRN: https://ssrn.com/abstract=1735804
Ozkan A. (2001) Determinants of capital structure and adjustment to long run target: evidence from UK company panel data. Journal of Business Finance and Accounting. Vol. 28 no. 1–2 pp. 175–198.
Pettit R. Singer R. (1985) Small business finance: a research agenda. Financial Management Vol. 14 no. 3 pp. 47–60.
Rajan R.G. Zingales L. (1995) What do we know about capital structure? Some evidence from international data. The Journal of Finance Vol. 50 no. 5 pp. 1421–1460.
Ross S. A. (1977) The Determination of Financial Structure: The Incentive-Signalling Approach. The Bell Journal of Economics Vol. 8 no. 1 pp. 23-40.
Sbeti W.M. Moosa I. (2012) Firm-specific factors as determinants of capital structure in the absence of taxes. Applied Financial Economics Vol. 22 no. 3 pp. 209–213.
Scott J. (1977) Bankruptcy secured debt and optimal capital structure. The Journal of Finance Vol. 32 no. 1 pp. 1–19.
Sett K. & Sarkhel J. (2010) Macroeconomic variables financial sector development and capital structure of Indian private corporate sector during the period 1981–2007. The IUP Journal of Applied Finance Vol. 16 no. 1 pp. 40–56.
Solomon E. (1955) Economic Growth and Common Stock Values. Journal of Business Vol. 28 no. 2 pp. 213–221.
Titman S. Wessels R. (1988) The determinants of capital structure choice. The Journal of Finance Vol. 43 no. 1 pp. 1–19.
Van Horne J. C. Wachowicz J.M.Jr. (2008): Fundamentals of Financial Management [13th Edition]. Harlow (England) London New York: Prentice Hall Inc. Financial Times 719 p.
Warner J.B. (1977) Bankruptcy costs: some evidence. The Journal of Finance Vol. 32 no. 2 pp. 337–347.
Weston J. F. (1963) A Test of Cost of Capital Propositions. Southern Economic Journal Vol. 30 no. 1 pp. 105-112.