Financial Structure Choice in the United Arab Emirates Emerging Market

Journal of International Business Research, Vol. 6, No. 1, 2006, ISSN 1554-5466

Posted: 30 Mar 2006 Last revised: 23 Sep 2012

See all articles by Walaa Elkelish

Walaa Elkelish

University of Sharjah

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

Date Written: September 22, 2012

Abstract

This study explores the applicability of modern financial structure theories in the United Arab Emirates - an emerging financial market. Questionnaires were sent to the finance managers of a stratified random sample of U.A.E. food companies. A single sector study was chosen to aid comparability of responses. The responses are compared to each other and then to the previous empirical studies in the U.S.A. and Europe. The survey results show that respondents are more likely to be driven by behavioral/managerial factors in their choice of financial structure, rather than to target an optimal debt to equity ratio. A cross tabulation analysis highlights the importance of company and management demographic characteristics on financial structure choice, such as ownership status, management nationality, educational qualifications, company size and debt level. Further results indicate that respondents may be influenced in their financial structure choices by a number of different factors including: management goals and values, business risk, management attitude towards risk, external environment factors, use of equity finance as a last financing resort and to trade-off costs and benefits of using debt.

Keywords: Modern financial structure theories; United Arab Emirates; behavioral/managerial factors

JEL Classification: G32, M40, M41

Suggested Citation

Elkelish, Walaa and Marshall, Andrew P., Financial Structure Choice in the United Arab Emirates Emerging Market (September 22, 2012). Journal of International Business Research, Vol. 6, No. 1, 2006, ISSN 1554-5466, Available at SSRN: https://ssrn.com/abstract=890102

Walaa Elkelish (Contact Author)

University of Sharjah ( email )

United Arab Emirates

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

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