Capital Structures in Developing Countries: The Latin American Case
Investigación Económica, LXXI, 282, 35-54, 2012
Posted: 3 Nov 2013
Date Written: November 1, 2012
Rajan and Zingales (1995) find that tangibility, growth opportunity, size and performance are the four common determinants to explain capital structure across G-7 countries. In this study, we consider a sample of 590 firms from Argentina, Chile, Mexico, Peru and United States of America, to analyze whether the four common determinants also explain the capital structure in the Latin American countries. Moreover, we use a different sample of companies and an extended number of years for USA firms and we find similar results compared to the ones reported by Rajan and Zingales more than ten years ago. Considering the updated results for USA firms and as we expected, we report for Chilean firms similar results. The capital structure of Chilean firms is: positively related to tangible assets; negatively related to growth opportunities; positively related to size and negatively related to performance. This is not only true for book leverage but also for market leverage. The rest of Latin American countries show mixed results. In any case, we find two or three determinant to be statistically significant. Nevertheless, those determinants are not the same when we use book leverage versus market leverage.
Keywords: Capital Structure, Tobit Model, Panel Data, Generalized Method of Moments
JEL Classification: C30, C33, G15, G32
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