Were Modern Capital Structure Theories Valid in Belgium Before World War I?

25 Pages Posted: 22 Apr 2008

See all articles by Marc Deloof

Marc Deloof

University of Antwerp; Antwerp Management School

Wouter Van Overfelt

affiliation not provided to SSRN

Abstract

This study investigates whether modern theories can explain capital structure in a historical environment which was characterized by poor investor protection, booming stock markets and strong banks, and in which taxes did not affect leverage. Our results, based on a unique, hand-collected sample of 556 firm-year observations for 129 listed companies in Belgium before World War I, are remarkably similar to findings for present-day samples. Leverage was positively related to asset tangibility, firm size and firm age, and it was negatively related to profitability and prior stock returns. Bank relationships were associated with lower leverage.

Suggested Citation

Deloof, Marc and Van Overfelt, Wouter, Were Modern Capital Structure Theories Valid in Belgium Before World War I?. Journal of Business Finance & Accounting, Vol. 35, Nos. 3-4, pp. 491-515, April/May 2008. Available at SSRN: https://ssrn.com/abstract=1122934 or http://dx.doi.org/10.1111/j.1468-5957.2008.02080.x

Marc Deloof (Contact Author)

University of Antwerp ( email )

Prinsstraat 13
Faculteit TEW
Antwerpen, 2000
Belgium
+32 3 265 41 69 (Phone)
+32 3 265 47 99 (Fax)

HOME PAGE: http://https://www.uantwerpen.be/en/staff/marc-deloof/

Antwerp Management School ( email )

Het Brantijser
Sint-Jacobsmarkt 9-13
Antwerp, 2000
Belgium

Wouter Van Overfelt

affiliation not provided to SSRN ( email )

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