خلاصة:
This paper explores the leverage determinants across firms’ sizesbased on the two main theories behind the capital structure, the trade-offand the pecking order theories. A panel data is sued to find therelationship between capital structure and the variables that proxy forbenefits and costs of debt during 1990 to 2006. Our findings show thatboth principles help to explain the capital structure of small, medium, andlarge firms. However, greater emphasised should be placed on the tradeofftheory. In addition, small firms differ from large companies in level ofgrowth opportunities, structure of assets, and probability of bankruptcyand agency costs. Therefore, different firms’ characteristics are importantto affect the power of leverage determinants and thus leveragedeterminants are likely to be size dependant. These results support theexisting differences between small and large firms considering theagency costs and the bankruptcy costs.
ملخص الجهاز:
Rajan and Zingales (1995) and Frank and Goyal (2007) argue that size may be a proxy for asymmetric information between firms and capital markets thus large firms can issue sensitive-information securities and use less debt consistent with the pecking order theory.
Second, the capital structure of large and small firms are consistent with the predictions of the pecking order theory where the leverage, long- term book leverage (LTBL), and long-term market leverage (LTML) are inversely related to profitability.
In addition, small firms differ from large companies in level of growth opportunities, structure of assets, and probability of bankruptcy and agency costs.
In addition, small firms differ from large companies in level of growth opportunities, structure of assets, and probability of bankruptcy and agency costs.
K small and medium sized companies (SMEs), Liu and Tian (2009) for Chinese SMEs, have found a positive relation between leverage and volatility of earnings in contrast to Lopez-Gracia and Sogorb-Mira (2008) using Spanish SMEs. The empirical results for impact of business risk based on large companies are also mixed.
The results show that consistent with the tax hypothesis, the leverage of large companies is statistically positively related to the effective tax rate contracting to small and medium sized firms.
The results show that consistent with the tax hypothesis, the leverage of large companies is statistically positively related to the effective tax rate contracting to small and medium sized firms.