DOES CAPITAL STRUCTURE MATTERS INDUSTRY TYPE? IN THE ABSENCE OF SECONDARY MARKET-A LITERATURE REVIEW

© 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) DOES CAPITAL STRUCTURE MATTERS INDUSTRY TYPE? IN THE ABSENCE OF SECONDARY MARKET-A LITERATURE REVIEW 1 Hayleslasie Tsegay Aregawi, 2Dr. B. Chandra Mohan Patnaik 1 Research Scholar, School of Management, KIIT University, Bhubaneswar, Odisha, India 2 Professor, School of Management, KIIT University, Bhubaneswar; Odisha, India ABSTRACT Among the objectives of share companies, maximizing shareholder wealth is the primary objective. Intellectuals, scientists, researchers, and academicians associated capital structure as a lifeblood of a business; besides, it might be financed through internal or/and external sources of finance. The aim of this review article is to identify whether determinants of capital structure matters the industry type of financial and non-financial institutions in the absence of engagement in the secondary market. For the sake of attaining the stated objective, and to collect relevant information second-hand data has used like documents and journal articles of several writers. Size of the firm, age, Profitability, Liquidity position, Growth of the firm, non-debt tax shield, business risk, asset tangibility, inflation rate, economic growth rate, management efficiency, risk of banks, net profit margin, dividend payout, GDP growth rate, interest rate, opportunity size, earning volatility is the explanatory variables identified under this review. The frequent determinants of capital structure in banks, manufacturing, and insurance companies were found like size, tangibility and liquidity position, which is positively associated, whereas, Profitability and Growth of the company has a negative relationship. Construction Company does not have a common issue, which associates the relationship with other share companies in the absence of secondary markets. Keywords: Capital Market, Capital Structure, Determinants, Industry Originality/ value: in the past, such kinds of review literature is not reviewed as per the scholar’s comprehension, this makes exceptional, particularly in Ethiopia covering four industries (Insurance, Banks, Construction and Manufacturing industries) “What determines capital structure in the stated industry, in the absence of secondary market” and it’s common domain and difference. 1. An Overview There are various theories of capital structure; the MM theory commonly dated back during 1958 Developed by Modigliani and Miller is among the most influential theorists based on the principles of tax and brokerage costs; no brokerage, investors have the same information about the opportunities of investment in the future and can borrow at the same rate. In the dynamic and competitive world, the capital structure decision plays a crucial role in day-to-day business performance and operations. The issue is still debatable for practitioners and academicians. After the MM theory, to explain the optimum capital structure, a number of theories have developed, such as static trade-off theory, Agency cost theory, pecking order theory, traditional approach, net income approach, and net operating approach. Therefore, Capital structure alerts the association between long-term financing preferences of a firm such as retained earnings, equity shares, debt capital, and preference shares. Making an appropriate decision on financing their business is the role of financial managers as well as corporate governors due to the closely related between profitability and value of the firm. It is obvious that the accessibility and proper implementation of the capital market and financial segments has a strong political, socioeconomic contribution, in addition to the backbone of economic growth, national development, and poverty reduction. However, in the absence of appropriate capital market IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 71 © 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) drag the economic development backward and unable to optimize the capital structure of firms. African countries, especially in Ethiopia, the financial sector is dominated by the public, this means the share capital is not free to international investors as privatization. Bases for preference of financial source alternatives of firms are limited in countries suffering due to an absence of a secondary market to raise funds for expansion of new as well as existed companies. Different industries may use various sources of finances options; the same is true on factors affecting capital structure of manufacturing, bank, insurance, and construction companies. 2. Objectives of the Study:  To identify the determinants of long-term financing of individual companies  Identification of variables (if any) which is common domain and/or differences based on the empirical research via literature review 3. Methodology of the Study To complete this review article, the researcher adopted a secondary source of data by referring to unpublished documents, journal articles, company documents websites and researchers experience. In this review, the author tries to incorporate four types of industries (Bank, Insurance, Manufacturing, and Construction). These companies were selected using convenience approach, studies conducted based on the panel data for more than five years. Systematic review with the chronological order was among the idiosyncratic method employed. 4. Review Literature 4.1. Introduction Every corporate finance managers should consider the decision policies (capital structure, dividend policy, and capital budgeting, working capital management) which play a crucial role in maximizing shareholders wealth. Accordingly, for corporate managers and academicians, financing preference is an issue, which remains significant in developed as well as developing countries. Stewart Myers, Modigliani, and Miller, Michael Jensen, Stephen Ross, William Meckling has a deal with capital structure relevance. Theories developed by these scholars are the MM theory, trade-off theory; information asymmetry theory, pecking order theories and agency cost theory are among the theory, which mainly plays a crucial role in testing and identifying the various aspects of loan capital to equity decisions. Still, there are no consistent results on the determinants of capital structure decisions, which are supporting the relevance of capital structure on the value of the firm, and another study concludes it does not have an effect on maximizing the value of the firm. Even the theories of capital structure do not apply for each type of businesses organizations like construction companies, micro and small enterprises have not a clear financing preference trend. On the other hand, countries in absence of a secondary market, the financing alternatives of corporate firm have become restricted/limited, corporate finance practitioners, financial policymakers and regulatory has a crucial role in addressing the issue. Academicians conducted their study on the impact of capital structure, profitability, performance and value of the firm more specifically in commercial banks, manufacturing, insurance companies. The above-mentioned three sectors have their own way of financing, but it is important to see the relationship among them in using the capital structure. Consequently, this review article presents the results of Banking Industry, Insurance, Construction and manufacturing firms in Ethiopia, which was deal on the association of capital structure with different business types especially to identify the factors affecting leverage (debt-equity ratio) positively as and/or negatively. All mentioned public and private own sectors in the Ethiopian context. Manufacturing sectors further grouped into small and large scales industries, the mostly large-scale industry is predominantly public owned and small-scale industry owned by private sectors. Furthermore insurance and banking industry owned by private and public. There is an absence of permission on the privatization of banking and the insurance industry to foreign investors. No matter how the size of the businesses is large/small, private or public, needs finance to fulfill their business activities like for their working capital requirements based on their size, nature, and type and fixed assets as an engine of the business. Therefore, in corporate finance, the decision of capital structure is the heart of other decisions. The way and accessibility of finance owned by private and public sectors varied, particularly in the absence of the capital market. IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 72 © 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) Hence, the amenability of financing preference of manufacturing, banking industry, insurance companies and construction sectors owned by private and public sectors needs segregated in identifying the impact of capital structure on firm’s value and profitability on the applicability of theories of capital structure. Despite this, even if similarities on determinants of capital structure, performance and profitability and leverage existed, comparisons among the stated sectors with private and public owning needs an attention by academicians on the micro and macroeconomic situations in the absence of secondary markets. 4.2. Manufacturing Companies Manufacturing firms have long last history starting from the cottage industry to medium and large industries in Ethiopia. The large and medium-size manufacturing sector accounts 97% and small covers remain 3%, more of the manufacturing sector owned by private, as the results of the government privatization policy, except financial institutions. Foreign investors account 7.5% capital of the private sector industry investments. Financing preference alternative is unquestionable for capital accumulation or expansion of projects, but, in the absence of alternatives, it cannot deserve the government as well as companies objectives. In this framework review article, the findings of a certain study incorporated based on the chronological order. Fisseha and Lavanya (2012) in their study opted to determine the theoretical and empirical implication of capital structure of manufacturing companies using panel data. The authors identified (tangibility, profitability, growth, size, non-tax shield and age of the firm) explanatory variables and it was covered five years (2006-2011) of thirty-three companies. The findings of the study generated through ordinary least square showed that preference of debt-equity ratio selection matters the manufacturing companies of nonfinancial sectors. As a result, the study concluded; age, profitability, and growth of the sector have negatively associated with the capital structure, whereas size, tangibility, and tax-shield associated positively. Usman in (2013) also has conducted his study focused on identifying the factors affecting large taxpayers share company capital structure. He used the econometric model on thirty-seven companies with panel data of five years (2006-2009). The study adopted nine accepted explanatory variable (size, non-debt tax shield, profitability, tangibility, age, liquidity, growth, earnings volatility, and dividend payout ratio). Accordingly, the result of the study concludes liquidity position, size, tangibility, age, and non-debt tax shield of a company has correlated positively with debt equity capital, whereas earnings volatility, profitability, and dividend payout ratio are associated with leverage negatively and Growth of share companies does not affect leverage. As per the scholar’s suggestion, agency cost theory is evidence, which is convincing in financing their investment rather than others. Frezewd (2016) conducted her study, the association of capital structure and the impact on the profitability of twenty-four large manufacturing taxpayers covered five years (2010-2014) with panel data regression firm-level factors. The study concludes long-term debt, short-term debt to total liability, and interest coverage ratio reveals positively associated on profitability, whereas debt to equity ratio and debt ratio shows insignificant. Asrat (2016) in his study, he tried to investigate the association of eight cement companies capital structure and performance covered five years (2010-2014) which is covered by long-term to equity ratio and return on asset and return on equity was used to measure the financial performance. The results of Econometric model found that long-term debt to equity ratio is positively associated with return on asset. Tangibility and size positively associated with return on equity. In addition, growth opportunity and capital adequacy has no significant relationship with return on asset. Beside of this, logarithm of long-term debt to equity ratio negatively associated with return on equity and tangibility, capital adequacy and logarithm of liquidity as positively associated with return on equity, while size and change in gross domestic product has no significant relationship with return on equity. On the other side, business risk has negatively associated with both return on asset and return on equity. Niway (2016) conducted a study on the impact of financing choice on firm’s financial performance covered seven years (2006-2012) of 15 manufacturing companies and used financial measures of return on assets and return on equity. Total debt, long-term debt, and short-term debt to total asset ratio are measures of capital structure and liquidity, tangibility, firm size, firm growth are among the control variables. To generate meaning-full information, the researcher applied Random Effect regression model. Accordingly, IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 73 © 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) the study concludes that long-term debt, total debt ratios, short-term debts have a relationship with Return on Equity and Return on Assets significant positive impact. Tariku (2016) conducted his study on the effect of leverage on the profitability of manufacturing by adopting panel data of five years (2007-2011) in thirty-three firms, to indicate the relationship between the capital structure and firm's profitability and linear regression model has employed. As a result, the study concludes the positive relationship between total debt ratio and profitability. 4.3. Construction Business In Ethiopia, the contribution of the construction industry is highly progressive in a remarkable manner to the national growth with 4.5% contribution to GDP. In the construction industry, there are four categories of contractors and ten grades (building, general, road and specialized) as a ministry of urban development, housing and construction. To hold up their capital investment and operation it requires raising huge finance in debt and/or equity form. Therefore, certain studies presented below to indicate the relevance of capital structure in the construction industry. In this review for comparison purpose, we present one-construction companies since more scholars’ attention in on the remaining three sectors for simplicity action. Netsanet (2012) has done a study on the determinant of capital structure on construction companies, which is new issues on the preference of capital composition, a panel data used covering five years (20062010) of eleven companies particularly the researcher tried to investigate the pecking order theory. Accordingly the study concludes non-debt tax shield, tangibility, and growth opportunity are among the variables which were positively associated with capital structure of construction companies whereas size, liquidity, age, Profitability, earnings volatility, liquidity, and age are the factors which inversely alter their leverage ratio of construction companies. 4.4. Insurance Companies As far as Ethiopian insurance company is concern, historically as well as at present there is huge integration with commercial banks since their activity is more or less similar. In addition, the history of foundation is at the beginning of 19th century while Abyssinia Bank of Ethiopian was build up by Egyptians. To this evidence most of Commercial Banks Share Company has an outlay of insurance companies. The financial ability of the insurance industry plays an important role to raise the value of the company, to make a promise to meet contingent claims, and to maximize share holds wealth. This deals whether the capital structure has relevance to the financing of insurance industry or not. In Ethiopia, there are fourteen insurance companies with the ownership of thirteen private and one public. The studies, which have conducted by different scholars, presented as follows. Solomon (2012) undertook a study on firm characteristics like profitability, size, tangibility, liquidity, growth, business risk, non-debt tax shields, and age and dividend payout on insurance companies within a period of eight years (2003-2010) by adopting panel data composed of the financial statement of nine insurance companies. The researcher concludes growth, size, non-debt tax shield, and business risk found a positive impact on the financial preference of insurance companies. However, tangibility, profitability, dividend payout, liquidity, and age have a reverse effect on capital structure choice. Dereje (2014) has done on leverage determinants of private insurance companies and found that the proportion of debt in the capital mix is a moderate effect. On the other hand business risk, firm profitability, and non-debt tax shield has associated negatively with leverage. Firm size, profitability, and asset tangibility had associated positively with leverage. As the researcher concluded, in insurance companies, pecking order theory supports liquidity and asset tangibility and trade of theory is partially applicable. Mohammed (2014) conducted his study on the impact of the capital structure of the performance of the insurance industry, as a capital structure is crucial for maximization of shareholders wealth. The emphasis of the study on the firm-specific factors (firm leverage, liquidity, size, growth, opportunities, risk, and tangibility) measured using return on asset. Firm leverage, tangibility, Size, and business risk has a significant impact on the performance of insurance companies, whereas there is no relationship between liquidity and firm growth. The result supports the pecking order theory, which asserts firms' performance determinant. Saddam (2014) undertaken his study on "the factors affecting capital structure decision" and main focuses was on the impact of macroeconomic factors and firm-specific capital structure which covers seven years (2007-2013) identifies liquidity, profitability, size, business risk, growth opportunity, GDP growth rate, age, inflation rate and interest rate towards total debt ratio measurement. This study concludes firm IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 74 © 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) size, business risk, inflation rate, and age are the positively affect the financing decision of insurance companies both trade-off and pecking order theories are prominent for the sector, whereas, liquidity, profitability, GDP growth rate, interest rate, and growth opportunity are found insignificant. Daniel (2014) in his study examines the determinants of capital structure particularly on the firmspecific characteristics of the insurance industry within the consecutive ten years (2005-2014) tried to highlight what the firm's financial manager should take into account to maximize shareholders wealth. In explaining the capital structure the static trade-off, pecking order, and agency cost are prominent in explaining the capital structure of insurance companies in Ethiopia, but the Pecking order theory dominant. Among the variables Asset tangibility, Profitability, liquidity, and growth found to be significant in relation to financial preference. As the study showed, the insurance industry has less preference of external prefers internal sources of finance than external sources, that is less debt in their leverage to finance future investments. On the other hand, size of the firm and business, risk has an insignificant relationship. The study was undertaken by Esmael (2015) deals with investigating the determinants of financing preference (capital structure) of insurance industry in Ethiopia, the main emphasis of the researcher was on the liquidity, tangibility, profitability, growth opportunity, risk and age of the firm, it considers seven consecutive years (2008-2014). The findings of the study reveal that some of the explanatory variables have a direct relationship and the reverse is true for others. Among the variables Liquidity, Asset Tangibility, Business Risk and Growth Opportunity were direct relations with Leverage, whereas both Age of the firm and Profitability have negatively associated with Leverage. The study concludes Asset tangibility and both age of the firm and profitability has significantly positive and negative impact on the insurance companies. On the other hand growth opportunity, Liquidity, and business risk has found no significant effect as a determinant of capital structure. In his study, Guruswamy (2016) try to asses leverage as dependent variables and nine independent variables, such as business risk, growth opportunities, the tangibility of assets, size of the firm, age, liquidity, inflation, management efficiency, and GDP employed. It adopted panel data of multiple regressions; accordingly, the regression result found that business risk, age, management efficiency, firm growth, inflation, and economic growth rate identified as the most important determinants. Business risk, Age, economic growth rate, management efficiency, and inflation are positively associated; the reverse is true for firm growth. Size, liquidity, the tangibility of assets had results an insignificant impact on the capital structure. Lastly, the researcher concludes agency cost theories, pecking order theories, and trades off theories are the prominent theories of Ethiopian insurance sectors. Except for trade-off trade theories, the remainder was theories that are more influential. 4.5. Banking Industry Kibrom (2010) conducted his study on the determinants of capital structure with the firm-specific factors and tried to explore six firm level predictor variables like size, profitability, growth, tangibility, taxshield and age are regressed against the ratio of debt to equity with selected financial statements of seven commercial banks, which covers ten years (2000-2009). The researcher concludes in his study, the size of the bank, tangibility, age, and tax-shield of the bank has a direct positive relationship with the capital structure and growth and profitability has a negative relationship. In addition, the study reveals consistency of capital structure theories and the selected parameters such as packing order theory and profitability, static order theory and tangibility. There is also uniformity between profitability and Pecking order theory; tangibility and Static Trade-off theory; agency cost theory and Pecking order theory; growth and size with Agency cost Theory and Static Trade-off theory; and variables tax-shield and age and Static Trade-off Theory. Weldemikael (2012) go for on the relationship between firm-specific characteristics, leverage as the value of the firm influenced by the optimal debt ratio structure, and most of the financial managers try to determine the policy decisions. The emphasized on the specific firm factors such as tangibility, profitability, risk, growth, liquidity, and size of banks for twelve years (2000-2011). Accordingly, the author identifies, as important determinants of leverage like size, profitability, liquidity, and tangibility of the banks are important determinants of capital structure of banks in Ethiopia. In Ethiopia, banking industry pecking order is pertinent theory whereas agency cost theory and static trade-off theory has a little evidence to support. Muhammed, Ashenafi, and Netsanet (2015) conducted their study to ensure whether capital structure matters on the performance of bank industry in Ethiopia, which is covering twelve years (2000-2012) annual IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 75 © 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) reports of eight commercial banks. In this study, the capital structure measured by total debt to total capital and total debt to total asset, and performance measured by net profit margin, return on equity, and return on asset. When performance measured by return on asset the average leverage has a positive effect on the performance of the bank industry, whereas a negative when performance measured by net profit margin and return on asset. The result supports both the pecking order theory and the trade-off theory. Aregawi (2015) conducted his study whether capital structure decision affects the value of the firm and the profitability of the banking industry. Audited financial statements for eleven years (2001/02 2012/13) has been used. The study concludes as capital structure measured, total debt to total asset were the statically negative impact on profitability but a deposit to the asset, loan to deposit, spread, and asset size has a positive relationship on the other hand growth found an insignificant effect. Giday (2015) also had undertaken his study on the financing preference of banking industry impact on profitability and firm value extended period of 5 years (2009 –2013). The findings showed that total debt to the total asset has a positive impact but insignificant, deposit to asset positive, loan to deposit, spread, and asset size positive relationship with profitability. Moreover, growth found an insignificant effect on profitability. Table 1: Determinants of capital structure explanatory variable in 13 studies Variable Tangibility Profitability Growth Size Tax shield Age of firm Dividend Liquidity Earnings Business risk Inflation rate GDP rate Interest rate Economic growth Management efficiency Companies undertaken in the study: Manufacturing, Insurance, Construction, and Bank Number of studies using panel date for more the five years 1 +ve +ve -ve +ve +ve -ve na +ve -ve na na na na na 2 +ve -ve 0 +ve +ve +ve -ve +ve -ve na na na na na 3 -ve -ve +ve +ve +ve -ve -ve -ve na na na na na na 4 +ve +ve na +ve na na na na na na na na na na 5 +ve -ve 0 +ve 0 0 0 0 0 +ve na na na na 6 +ve +ve -ve 0 na +ve na -ve -ve +ve +ve -ve -ve Na 7 +ve +ve +ve +ve na na na na 0 0 +ve -ve +ve -ve 8 +ve -ve +ve na na +ve +ve na na na na na na na 9 -ve 0 +ve na na +ve -ve -ve -ve na na na na na 10 0 0 -ve +ve +ve 0 +ve +ve +ve 0 0 +ve Ve +ve 11 0 0 -ve +ve 0 +ve 0 +ve +ve 0 0 +ve Ve +ve 12 +ve -ve -ve +ve +ve +ve na na na na na na na na 13 +ve +ve -ve -ve na na na +ve na na na na na na na na na na na na +ve na na -ve -ve na na Sources: Secondary Data, 2018 Clues: = +ve indicates negative effect, +ve indicates positive effect, na not available (the variable is not used in the study), 0 indicates there is no relationship or it does not affect the dependent variable (capital structure) IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 76 © 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) No Secondary Market Figure 1: Conceptual frameworks on determinants of capital structure with different companies Sources: Own Design, 2018 5. CONCLUDING REMARKS According to the creator's examination led at an alternate period on four industries, it would be finished up as pursues. This review article goes with eighteen articles, which gathered through an auxiliary wellspring of information. The majority of the investigation included under this survey has been received board information for over five years by taking a different report like determinants of capital structure and effects on painfulness and execution of protection industry, bank, development, and assembling organizations. As needs be, the reason for this audit was to recognize the determinants of capital structure and to separate the similitude and contrasts of the distinguished factors on the expressed firms without the capital market. Never expected to have the same effect, which studied by different authors in the different time span. Similarly, while the reviewer tried to review the articles on the identified capital structure factors, there is no identical effect, but certain explanatory variables observed as positively associated and others are negative. This review article encompasses studies of four industries, such as bank, construction, insurance, and manufacturing companies. Generally, more than twenty-three factors had identified as determinant factor on optimum capital structure of firms. Such as Size of the firm, age, profitability, liquidity position, growth of the firm, non-debt tax shield, business risk, asset tangibility, inflation rate, economic growth rate, management efficiency, risk of banks, net profit margin, dividend payout, GDP growth rate, interest rate, opportunity Size, earnings volatility. Beside of this, the logarithm of long-term debt to equity ratio was negatively associated with the return on equity and tangibility, capital adequacy and logarithm of liquidity has positively associated with the return on equity. While size and change in gross domestic products, have no significant relationship with return on equity. Firm leverage, tangibility, Size, and business risk has a significant impact on the performance of insurance companies. Whereas liquidity and firm growth were not clearly identified the relationship. Optimum capital structure of banking industry undertaken by Kibrom (2010), Weldemikael (2012), IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 77 © 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) Muhammed, Ashenafi and Netsanet (2015), Aregawi (2015), Giday (2015) had studied on the capital structure of banking industry, he found it was influenced positively by the size of the bank, tangibility, age, tax-shield, asset size, profitability, liquidity, return on asset, loan to deposit, and spread. Whereas growth, profitability, the risk of banks, net profit margin, total debt to total asset affects negatively. Solomon (2012), Dereje (2014), Mohammed (2014), Saddam (2014), Daniel (2014), Esmael (2015) and Guruswamy (2016) has done their study on the capital structure of insurance industry which is influenced positively by growth, size, non-debt tax shield, business risk, Profitability, asset tangibility, inflation rate age, liquidity, Growth, economic growth rate, management efficiency. Moreover, this negatively associated with dividend payout, age, business risk, GDP growth rate, and interest rate. The even-though construction industries capital structure is not clearly stated but in this review, Netsanet (2012), has identified certain variables which are positively affected such as non-debt tax shield, tangibility, growth opportunity and has a negative relationship with size, Liquidity, age, Profitability, and earnings volatility of the firm. Studies conducted on Manufacturing firms by Fisseha and Y. L. Lavanya (2012), Usman (2013), Frezewd (2016), Asrat (2016), Niway (2016), and Tariku (2016) mentioned firms size, Tangibility, Liquidity position, Age, non-debt tax shield are among the positively associated variable with long-term financing decision of the firm, whereas age, Profitability, Growth, Earnings, volatility, and dividend payout ratio has a negative relationship. The common determinants of capital structure in bank, manufacturing and Insurance Company are size, tangibility and liquidity position which is positively associated whereas profitability and growth of the company have a negative relationship. Determinants of the capital structure identified on the construction company do not commonly associated with remain share companies. There are no consistent results on the determinants of long-term financing decision among the identified industries. In addition to the mentioned factors, potential researchers should try to assess the macro and micro-economic factors separately. Furthermore, comparative analysis is important to compare and contrast the companies on their determinants. The secondary market is the primary sources of capital for share companies and used to mobilize saving and investment to have a healthy circulation of funds in a specific country as well as at a global level. In addition, it helps to attract multinational companies, if and only if there is a free entry policy of foreign investors to participate in financial institutions as well as large share companies. Therefore, policy makers, lenders, commercial banks, corporate governance are responsible for creating a sustainable environment for the establishment of the financial market by properly addressing the challenges. To identify the factors clearly, it is better if we adopt cross-sectional or panel data for more than one and half decades. References 1. Aregawi, H. 2015.. The impact of capital structure profitability of Commercial Banks in Ethiopia. Addis Ababa University, college of business and economics. Addis Ababa. 2. Asrat, K. 2016.Capital Structure and Financial Performance:Evidence from Ethiopian Cement Companies. Addis Ababa University, College of Business and Economics, Addis Ababa, Ethiopia. 3. Daniel, B. 2015. Determinants of Capital Structure of Insurance Companies in Ethiopia. Addis Ababa University, College of Business and Economics, Addis Ababa, Ethiopia. 4. Daniel, K. 2011. The Determinants of Capital Structure in Ethiopian Small Scale Manufacturing Cooperatives. Addis Ababa University. School of business and public administration. Addis Ababa, Ethiopia. 5. Dereje, G. 2014. Determinants of Leverage for Unlisted Firms: Evidence from Ethiopian Private Insurance Companies. Journal of Poverty, Investment and Development, Vol.4. 6. Fisseha, G. and Lavanya, L. 2012. Determinants of Capital Structure Decisions: Evidence from Ethiopian Manufacturing. International Journal of Research in Commerce, It & Management. Volume No. 2, Issue No. 2. 7. Frezewd, B. 2016. Corporate Capital Structure and Its Impact on Profitability: Evidence from Manufacturing Firms in Ethiopia. Addis Ababa University, College of Business and Economics, Addis Ababa, Ethiopia. 8. Giday, G. 2016. The Impact of Capital Structure on the Profitability of Commercial Bank of Ethiopia. Journal of Poverty, Investment and Development, Vol.28. www.iiste.org, ISSN 2422-846X. 9. Guruswamy, D. 2016. Determinants of Capital Structure of Selected Insurance Companies in Ethiopia. Developing Country Studies, Vol.6, No.10. www.iiste.org. ISSN 2224-607X. 10. Kibrom, M. 10. Determinants of Capital Structure. Mekelle University, College of Business and Economics, Mekelle, Ethiopia. 11. Mohammed, G. 2014. Determinants of Capital Structure and Its Impact on the Performance of Ethiopian Insurance Industry. Jimma University. Business and economics, Jimma, Ethiopia. IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 78 © 2018 IJRAR October 2018, Volume 5, Issue 4 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138) 12. Muhammed A., Ashenafi B., & Netsanet S. 2015. Does the capital structure matter on the performance of the bank?.International Journal of Scientific and Research Publications, Volume 5, Issue 12. ISSN 2250-3153. 13. Netsanet, B. 2012. Determinants of Capital Structure Decisions of the Construction Companies. Addis Ababa University. School of business and public administration. Addis Ababa, Ethiopia. 14. Niway, A. 2016. The Impact of Capital Structure Choice on Firms’ Financial Performance: Evidence from Manufacturing. Research Journal of Finance and Accounting. Vol.7, No.15, ISSN 2222-1697. 15. Saddam, M. 2014. Factors Affecting Capital Structure Decision: Evidence from Ethiopian Insurance Firms. Addis Ababa University, College of Business and Economics, Addis Ababa, Ethiopia. 16. Solomon, M. 2012. Firms’ Characteristics and Capital Structure: A Panel Data Analysis from Ethiopian Insurance Industry. International Journal of Research in Commerce & Management. Vol. (3). Issue 12. ISSN 0976-2183. 17. Usman, M. 2014. Determinants of Capital Structure: Empirical Evidence from Large Taxpayer Share Companies in Ethiopia. International Journal of Economics and Finance; Vol. 6, No. 1. ISSN 1916-971X. 18. Weldemikael, S. 2012. Determinants of Capital Structure (unpublished). Addis Ababa University, college of business and Economics. Addis Ababa, Ethiopia. IJRAR1904409 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 79