Cross-Country Determinants of Capital Structure Choice: A Survey of European Firms

Financial Management, Vol. 33, No. 4, Winter 2004

33 Pages Posted: 24 Sep 2004

See all articles by Franck Bancel

Franck Bancel

European School of Management (ESCP) - (EAP)

Usha R. Mittoo

University of Manitoba - Department of Accounting and Finance

Abstract

We survey managers in 16 European countries on the determinants of capital structure. Financial flexibility and earnings per share dilution are primary concerns of managers in issuing debt and common stock, respectively. Managers also value hedging considerations and use "windows of opportunity" when raising capital. We find that although a country's legal environment is an important determinant of debt policy, it plays a minimal role in common stock policy. We find that firms' financing policies are influenced by both their institutional environment and their international operations. Firms determine their optimal capital structures by trading off costs and benefits of financing.

Keywords: Capital Structure, European Managers, Survey, Debt, Equity

JEL Classification: G32, G15, F23

Suggested Citation

Bancel, Franck and Mittoo, Usha R., Cross-Country Determinants of Capital Structure Choice: A Survey of European Firms. Financial Management, Vol. 33, No. 4, Winter 2004. Available at SSRN: https://ssrn.com/abstract=594781

Franck Bancel (Contact Author)

European School of Management (ESCP) - (EAP) ( email )

79 avenue de Republique
75543 Paris, Cedex 11, 75011
France
+33 1 49 23 20 76 (Phone)
+33 1 49 23 20 80 (Fax)

Usha R. Mittoo

University of Manitoba - Department of Accounting and Finance ( email )

Faculty of Management
Winnipeg, MB R3T 5V4
Canada

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