The main objective of this paper is to investigate whether differences in institutional character... more The main objective of this paper is to investigate whether differences in institutional characteristics result in different capital structure determination among countries. First, we analyze the institutional setting in Greece compared with that of other countries. Second, we provide survey information about the determinants of capital structure in Greece and compare our findings with those of similar surveys in the United States and Europe based on Graham and Harvey [Graham, J., & Harvey, C. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60, 187–243], Bancel and Mittoo [Bancel, F., & Mittoo, U. (2004). Cross-country determinants of capital structure choice: A survey of European firms. Financial Management, 33(4), 103–133 Winter 2004] and Brounen, de Jong and Koedijk [Brounen, D., de Jong A., & Koedijk, K. (2006). Capital structure policies in Europe: Survey evidence. Journal of Banking and Finance, 30, 1409–1442] respectively. Greek firms seem to follow an own-business policy and seem to care more about the disadvantages of debt than try to exploit its advantages. Financial distress considerations, market timing and competitiveness are important factors, whereas agency costs of equity, pecking order and the signalling theory do not seem to apply. Conclusions are relatively similar with those of other countries, though specific differences that can be attributed to the different institutional settings do exist. In general however, we conclude that differences in institutional characteristics do not seem to affect the way of thinking of financial managers when they decide on capital structure issues.
This paper attempts to investigate the determinants of the capital structure of a sample of 972 l... more This paper attempts to investigate the determinants of the capital structure of a sample of 972 listed companies on the Shanghai Stock Exchange and Shenzhen Stock Exchange in China in 2003. Various theories, namely, the trade-off, pecking order and agency theories, are deployed to explain and predict the signs and significance of each factor identified by Ragan and Zingales (1995) and Booth et al. (2001). Furthermore, we include institutional shareholdings, including state agency shareholdings, state-owned shareholdings and privately owned shareholdings, as corporate governance variables to examine the effects of corporate structure on the debt financing behaviours. As well documented, we find that profitability is negatively related to capital structure at a highly significant level. The size and risk of the firms are positively related to the debt ratio – but only in term of market value measures of capital structure. The years of the companies being listed on stock markets are positively related to capital structure, indicating the access of the firms to debt finance is more easily judged by book value. Tax is not a factor in influencing debt ratio. Ownership structure has a negative effect on the capital structure. The firms with higher institutional shareholdings tend to avoid using debt financing, a behaviour that can be explained by entrenchment effects. A further classification of the institutional shareholders reveals that, among the three groups of institutional shareholding, the state institutions, including state agency and state-owned institutions, were more averse to debt financing, particularly for state-owned institutions. There is no strong evidence indicating debt-averse behaviour by domestic institutional shareholders.
In this paper we investigate the capital structure determinants of Greek, French, Italian, and Po... more In this paper we investigate the capital structure determinants of Greek, French, Italian, and Portuguese small and medium-sized enterprises (SMEs). We compare the capital structures of SMEs across countries and differences in country characteristics, asset structure, size, profitability, risk, and growth and how these may impact capital structure choices. The results show that SMEs in these countries determine their capital structure in similar ways. We attribute these similarities to the country institutional and financial characteristics and the commonality of their civil law systems. However, structural differences arise due to firm specific effects. We find that size is positively related to leverage while the relationship between leverage and asset structure, profitability and risk is negative. Growth is not a statistically significant determinant of leverage for any of the four countries. Our main conclusion is that firm-specific rather than country facts explain differences in capital structure choices of SMEs.
Despite a vast literature on the capital structure of the firm there still is a big gap between t... more Despite a vast literature on the capital structure of the firm there still is a big gap between theory and practice. Starting with the seminal work by Modigliani and Miller, much attention has been paid to the optimality of capital structure from the shareholders’ point of view. Over the last few decades studies have been produced on the effect of other stakeholders’ interests on capital structure. Another area that has received considerable attention is the relation between managerial incentives and capital structure. Furthermore, the issue of corporate control and, related, the issue of corporate governance, receive a lion’s part of the more recent academic attention for capital structure decisions. From all these studies, one thing is clear: The capital structure decision (or rather, the management of the capital structure over time) has to deal with more issues than the maximization of the firm’s market value alone. In this paper, we give an overview of the different objectives and considerations that have been proposed in the literature. We show that capital structure decisions can be framed as multiple criteria decision problems which can then benefit from multiple criteria decision support tools that are widely available.
The main objective of this paper is to investigate whether differences in institutional character... more The main objective of this paper is to investigate whether differences in institutional characteristics result in different capital structure determination among countries. First, we analyze the institutional setting in Greece compared with that of other countries. Second, we provide survey information about the determinants of capital structure in Greece and compare our findings with those of similar surveys in the United States and Europe based on Graham and Harvey [Graham, J., & Harvey, C. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60, 187–243], Bancel and Mittoo [Bancel, F., & Mittoo, U. (2004). Cross-country determinants of capital structure choice: A survey of European firms. Financial Management, 33(4), 103–133 Winter 2004] and Brounen, de Jong and Koedijk [Brounen, D., de Jong A., & Koedijk, K. (2006). Capital structure policies in Europe: Survey evidence. Journal of Banking and Finance, 30, 1409–1442] respectively. Greek firms seem to follow an own-business policy and seem to care more about the disadvantages of debt than try to exploit its advantages. Financial distress considerations, market timing and competitiveness are important factors, whereas agency costs of equity, pecking order and the signalling theory do not seem to apply. Conclusions are relatively similar with those of other countries, though specific differences that can be attributed to the different institutional settings do exist. In general however, we conclude that differences in institutional characteristics do not seem to affect the way of thinking of financial managers when they decide on capital structure issues.
This paper attempts to investigate the determinants of the capital structure of a sample of 972 l... more This paper attempts to investigate the determinants of the capital structure of a sample of 972 listed companies on the Shanghai Stock Exchange and Shenzhen Stock Exchange in China in 2003. Various theories, namely, the trade-off, pecking order and agency theories, are deployed to explain and predict the signs and significance of each factor identified by Ragan and Zingales (1995) and Booth et al. (2001). Furthermore, we include institutional shareholdings, including state agency shareholdings, state-owned shareholdings and privately owned shareholdings, as corporate governance variables to examine the effects of corporate structure on the debt financing behaviours. As well documented, we find that profitability is negatively related to capital structure at a highly significant level. The size and risk of the firms are positively related to the debt ratio – but only in term of market value measures of capital structure. The years of the companies being listed on stock markets are positively related to capital structure, indicating the access of the firms to debt finance is more easily judged by book value. Tax is not a factor in influencing debt ratio. Ownership structure has a negative effect on the capital structure. The firms with higher institutional shareholdings tend to avoid using debt financing, a behaviour that can be explained by entrenchment effects. A further classification of the institutional shareholders reveals that, among the three groups of institutional shareholding, the state institutions, including state agency and state-owned institutions, were more averse to debt financing, particularly for state-owned institutions. There is no strong evidence indicating debt-averse behaviour by domestic institutional shareholders.
In this paper we investigate the capital structure determinants of Greek, French, Italian, and Po... more In this paper we investigate the capital structure determinants of Greek, French, Italian, and Portuguese small and medium-sized enterprises (SMEs). We compare the capital structures of SMEs across countries and differences in country characteristics, asset structure, size, profitability, risk, and growth and how these may impact capital structure choices. The results show that SMEs in these countries determine their capital structure in similar ways. We attribute these similarities to the country institutional and financial characteristics and the commonality of their civil law systems. However, structural differences arise due to firm specific effects. We find that size is positively related to leverage while the relationship between leverage and asset structure, profitability and risk is negative. Growth is not a statistically significant determinant of leverage for any of the four countries. Our main conclusion is that firm-specific rather than country facts explain differences in capital structure choices of SMEs.
Despite a vast literature on the capital structure of the firm there still is a big gap between t... more Despite a vast literature on the capital structure of the firm there still is a big gap between theory and practice. Starting with the seminal work by Modigliani and Miller, much attention has been paid to the optimality of capital structure from the shareholders’ point of view. Over the last few decades studies have been produced on the effect of other stakeholders’ interests on capital structure. Another area that has received considerable attention is the relation between managerial incentives and capital structure. Furthermore, the issue of corporate control and, related, the issue of corporate governance, receive a lion’s part of the more recent academic attention for capital structure decisions. From all these studies, one thing is clear: The capital structure decision (or rather, the management of the capital structure over time) has to deal with more issues than the maximization of the firm’s market value alone. In this paper, we give an overview of the different objectives and considerations that have been proposed in the literature. We show that capital structure decisions can be framed as multiple criteria decision problems which can then benefit from multiple criteria decision support tools that are widely available.
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