Determinants of Capital Structure: An Expanded Assessment
58 Pages Posted: 19 Dec 2018 Last revised: 25 Apr 2019
Date Written: April 19, 2019
We empirically evaluate 56 proposed determinants of capital structure in terms of statistical significance, economic significance, identification, and intertemporal stability. We present a unified capital structure framework in which each proposed determinant represents a constraint on shareholder value maximization in interactions with related parties. We find that truly robust and economically important determinants of debt ratios are rare. However, the evidence as a whole shows that the strongest determinants are those related to shareholder interactions with prospective equityholders and debtholders. Determinants related to shareholder interactions with other parties—such as managers, suppliers, and government—are less relevant for the capital structure decision.
Keywords: capital structure
JEL Classification: G32
Suggested Citation: Suggested Citation