Relative Importance of Country and Firm-Specific Determinants of Capital Structure: A Multilevel Approach

Prague Economic Papers 2019

17 Pages Posted: 15 Jun 2021

See all articles by Rumeysa Bilgin

Rumeysa Bilgin

Istanbul Sabahattin Zaim University

Date Written: 2019

Abstract

This paper evaluates the relative importance of country and firm-specific determinants of capital structure using a multilevel modelling approach. Annual data for 18,201 public and non-financial firms from 66 countries are analysed for the period 2000–2016. Variance decomposition analysis is employed in order to assess the relative importance of country and firm levels. Additionally, random intercept and random coefficient models are used to analyse direct and indirect effects of capital structure determinants. Our results showed that country and firm levels explain approximately 10% and 60% of the total variability in capital structures, respectively. This shows that managers assign a higher importance to the firm-level factors when making capital structure decisions. Also country-level variables affect leverage choices to a lower extent.

Keywords: determinants of capital structure, multilevel mixed model, panel data

JEL Classification: G30, G32, C33

Suggested Citation

Bilgin, Rumeysa, Relative Importance of Country and Firm-Specific Determinants of Capital Structure: A Multilevel Approach (2019). Prague Economic Papers 2019, Available at SSRN: https://ssrn.com/abstract=3860666

Rumeysa Bilgin (Contact Author)

Istanbul Sabahattin Zaim University ( email )

Halkali Caddesi
No: 2
Istanbul, Kucukcemece 34303
Turkey

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