Capital structure, bank size, dividend payout, profitability, tangible assets, business risk, tax and banking industry introduction determinants of capital structure in financial institutions differ from nonfinancial. Determinants of capital structure mba knowledge base. Finally, this results into the notion, that in perfect markets, in terms of market value maximisation, an optimal capital structure is nonexistent salminen, 20. The determinants are numerous and varied and there is both a lack of consensus and a lack of evidence to support the propositions. Capital structure theory and determinants with reference to finnish smes bachelors thesis oulu business school april 2018. In the beginning, this research was mostly focused on recommending a socalled optimal capital structure as a targeted debttoequity ratio that would minimize the. Accordingly, financial managers will principally want to know the relationships between certain firmspecific measures and the debt ratio. The mainobjectives this study wasexamining the determinants of capital structure and its impact on the performance of ethiopian insurance industry. The determinants of the capital structure of listed on. Hence, the optimal capital structure must be used as the definitive capital structure that decreases the weighted average cost of capital wacc with an increase in shareholders value. Figure 1, presented by pandey 1999, explains completely the process of capital structure decision in order to get optimal capital structure. The purpose of this thesis is to investigate the impact of the capital structure determinants on the smes borrowing behavior. So far, many empirical studies have been carried out to identify and explain the contributing factors to influence the choice for a particular capital structure suitable to any individual firm or group of firms.
In section 2 the potential determinants of capital structure are summarized and theoretical and empirical evidence concerning these determinants is provided. This paper analyzes the impact of variables suggested by the tradeoff theory and the pecking order theory, on publicly listed swedish firms in a. Many previous empirical studies were studying the same topic by using different countries. Chen, zhanquan 20 the determinants of capital structure. The determinants of capital structure finance essay. This research led to the development of a model of capital structure determinants by integrating factors related to. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Determinants of capital structure in financial institutions differ from nonfinancial institutions due to issues peculiar to these institutions. The research based on determining the determinants of the capital structure decisions in tanzanian context.
The objective of this paper is to identify the determinants of capital structure and discuss the key theories on capital structure. The determinants of bank capital structure by eleftheria. Additionally, in this thesis, when referred to capital structure, by and large this relates mostly to the indebtedness of a. First i will select a number of firmspecific determinants as independent variables, whose influence on the capital structure i will test in multiple analyses. Most empirical studies that examined the determinants of capital structure have been done for specific country and there is little evidence of gcc region. Lew 2012 examines capital structure theories and debt level determinants by. Three essays on capital structure determinants hosein maleki, ph.
For the sme, it is evident that level of education and gender of the entrepreneur, industry, and location of the firm are also important in explaining their capital structure. Evidence from an economy without stock market ignacio munyo. In this thesis i will research the influence of a certain set of determinants on the capital structure of dutch stockmarket listed firms. The determinants of bank profitability through the global. Cbepr002501 research project submitted to the department of accounting and finance, college of business and economics, mekelle university, for the partial fulfillment of the degree of master of finance and investment. Evidence from commercial banks in ethiopia submitted by me for the award of the degree of master of science in finance and investment of mekelle university, is original work and it hasnt been presented. Another factor which can affect the capital structure of a firm is a financial crisis. First i will select a number of firmspecific determinants as independent variables, whose influence on the. Thus, the current study fills the gap in the literature and provided an evidence, using recent and long data, of determinants of capital structure of banking sector in gcc region 1. The capital structure theory was pioneered by modigliani and miller 1958. A study on determinants of capital structure in india.
This thesis examines the impact of capital structure on firms financial. Once the available and relevant financial sources for a uruguayan firm are defined, their determinants are analyzed. Capital structure a reading prepared by pamela peterson drake outline 1. Ten independent variables and three dependent variables have been tested using regression analysis. Determinants of capital structure and the cost of capital.
Augustine, at extensions 84243, 82241, 82215 or email uwispace. In the first instance, the results of the study showed that the financing behaviour of banks mirrors that of nonfinancial firms. Determinants of capital structure of ukrainian corporations. The bankruptcy hypothesis states that more capitalized banks will be better off because they face lower costs of funding, and because a higher ratio allows banks to absorb any shocks that they may experience. In this thesis, the researcher will enhance understanding in the area of capital structure. Riku siljander capital structure theory and determinants with. As financial intermediaries, banks play a crucial role in the functioning of most economies. In this study, the mainly discussion focuses on these two theories and find out the determinants factors of capital structure choice by using japanese firms. Determinants of social capital social capital research. We show that better rated firms have significantly more stable leverage ratios over time. This paper analyzes the impact of variables suggested by the tradeoff theory and the pecking order theory, on publicly listed swedish firms in a sample period of 8 years, ranging from 20032010.
In their study, modigliani and miller 1958 argued that capital structure was irrelevant to firm value. In presenting this thesis in partial fulfillment of the requirements for a postgraduate degree from universiti utara malaysia, i agree that the university library may. There is also significant theory on the capital structure of firms and its determinants. Capital structure consists of debt as well as internal and external equity. Empirical evidence from the largest global banks 1. Other investigators suggest that social capital can be created in the short term to support. Abstract decision on capital composition is a crucial decision for firms as it has major financial and profitability implications. If you wish to start a community or collection, you can contact the dspace development team at the alma jordan library, st. Writing this master thesis has been both learning and difficult.
Determinants of capital structure theoretical aspects corporate finance literature has focused on two broad categories of explanation for capital structure viz. Hypotheses about leverage decisions and debt maturity choices of firms are formulated based on the capital structure theories, mainly tradeoff theory and pecking order theory. Chapter four examines the determinants of bank financing of smes in ghana. Findings of this paper are robust in using two panel regression models, and can help vietnamese banks managers have a general perspective regarding capital structure determinants. This dissertation is going to study the determinants of capital structure of. Due to data limitations, the study on private firms has largely been neglected. The theory of trade off was developed by kraus and litzenberger 1973 arguing that the companies choose their optimal capital structure by by evaluating the revenue and costs, debt.
Determinants of capital structure in this section, we present a brief discussion of the attributes that different theories of capital structure suggest may affect the firms debtequity choice. The main objective of the thesis was to investigate the factors that determine capital structures of financial firms using two separate samples of banks and insurance companies. The impact of capital structure determinants on smes leverage. Determinants of capital structure in nigerian banking sector. The theory of trade off was developed by kraus and litzenberger 1973 arguing that the companies choose their optimal. Determinants of capital structure univerzita karlova. For banks, which constitute the largest portion of financial institutions in nigeria, liabilities relating to legal capital regulations are the most important factors determining the capital structure. This is to certify this is thesis prepared by mohammed getahun, entitled. The the major contending theories of capital structure as well as th eir predictions are considered. It has been observed that an organizations worth is independent of the capital structure. Therefore, proper care and attention need to be given while determining capital structure decision. A comparative study of public and private firms 1 i. An appropriate capital structure is a critical decision for any business organization to be taken by business organization for maximization of shareholders wealth and sustained growth. Results derived from the study of public firms are generalized to the private firms.
All researchers use a ratio of equity to total assets as a proxy for the capital structure or adequacy of a bank. Determinants of capital structure university of twente student theses. The purpose of this thesis is to examine the determinants of capital structure of commercial banks of the european union of 15countries during the financial crisis 20072012, with intention to contribute to the limited. A comparative study of public and private firms 3 there are certain limitations to the existing literature on capital structure. The purpose of this thesis is to examine the determinants of capital structure of commercial banks of the european union of 15countries during the financial crisis 20072012, with intention to. These attributes are denoted asset structure, nondebt tax shields, growth. A researcher found out on how tanzanian nonfinancial listed companies characteristics relate to their financial leverages and on how choose. This study makes several important contributions to the existing studies of capital structure. Thesis for the master of management in finance and. The paper identifies the most important determinants of capital structure of 870 listed indian firms comprising both private sector companies and government companies for the period 20012010. Abstract this paper analyzes the determinants of the sources of funding for the firms of an economy without stock market. Xiaohong huang a dissertation submitted in partial fulfilment of the requirements of the university of twente for. The determinants of capital structure evidence from commercial banks in ethiopia by kibrom mehari fisseha reg.
Capital structure decisions are among the most significant finance decisions companies. They possibly will need to know the factors that influence the. This research led to the development of a model of capital structure determinants by integrating factors related to ownermanagers, firms, culture, and environment. Concordia university, 2016 the first essay studies the influence of credit ratings on the timeseries evolution of corporate capital structures. Introduction banks constitute one of the most important groups of financial intermediaries. I will compare the influence of the firm specific variables across different time periods to. The determinants of capital structure boston college. The determinants of the capital structure of listed on stock. In section 1 the most prominent theoretical and empirical findings are surveyed. The main aims of this study are to determine the factors which affect capital structure of corporations operating in energy sector and to detect capital structure theories with which capital structure of energy sector companies would comply. Determinants of capital structure and the cost of capital a time and industry differentiated study on swedish listed firms abstract. This thesis investigates the determinants of capital structure of small and medium sized enterprises smes from manufacturing sector in turkey. A case for pakistani cement industry, the lahore journal of.
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