Firm- and Country-Level Determinants of Corporate Leverage: Some New International Evidence
36 Pages Posted: 15 May 2011 Last revised: 25 May 2018
Date Written: May 1, 2011
This research analyzes the determinants of capital structure across 37 countries. Institutional arrangements matter for capital structure decisions; however, firm-level covariates drive two-thirds of the variation in capital structure across countries, while the country-level covariates explain the remaining one-third. The observed relationships between the country-level determinants and leverage provide strong support to the predictions of both the trade-off and the pecking-order theories. Country-level determinants serve as substitute mechanisms for the firm-level, industry-level, and macroeconomic determinants by moderating their marginal impact on leverage.
Keywords: Dynamic capital structure, International, Institutions, Trade-off, Pecking order
JEL Classification: G20, G32
Suggested Citation: Suggested Citation