Capital Structure Determinants: A Cross-Country Analysis

Abstract

This paper examines the capital structure across different countries from 2005 to 2015 in Egypt and other three selected countries namely: Turkey, Brazil and Argentina. The book leverage sensitivity to the explanatory variables (profitability, firm size, tangibility, volatility, GDP growth, inflation and stock market development) was examined. Specifically, this paper documents the determinants of capital structure in Egyptian listed non-financial firms and investigates how capital structure decisions in three other countries who are one-step ahead in terms of economic development entertain any unique features. Profitability was the only variable consistently highly significant with negative coefficient obtained in our regressions for four countries using GMM estimation method. Inconsistency of results for other variables prevailed. Findings reveal that Egyptian firms on average are not highly leveraged due to supply constraints on bank lending and demand constraints on consumer borrowing. The empirical evidence seems reasonably consistent with some versions of capital structure theory and other studies.