Capital Structure Around the World: The Roles of Firm- and Country-Specific Determinants
45 Pages Posted: 15 Oct 2007
Date Written: September 11, 2007
We analyze the importance of firm-specific and country-specific factors in the leverage choice of firms from 42 countries around the world. Our analysis yields two new results. First, we find that firm-specific determinants of leverage differ across countries, while prior studies implicitly assume equal impact of firm-specific factors. Second, although we concur with the conventional direct impact of country-specific factors on the capital structure of firms, we show that there is an indirect impact because country-specific factors also influence the roles of firm-specific determinants of leverage.
Keywords: country-specific factors, firm-specific factors, leverage, Capital structure, international evidence
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