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Capital structure: Evidence from Dutch firms

Rödel, H.A. (2013) Capital structure: Evidence from Dutch firms.

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Abstract:This study investigates which factors are important in de capital structure decisions of Dutch listed non-financial firms. The sample consist out of 77 Dutch firms, which are listed on the stock exchange Euronext Amsterdam in the period from 2004 till 2009. Using ordinary least squares regression analysis, factors of three theories are investigated: the trade-off theory, the pecking order theory and the agency cost theory. The empirical results indicate that the most important factors of the capital structure decision in the Netherlands are size, tangibility, profitability and free cash flow. Overall, larger Dutch firms do have a higher debt ratio. Dutch listed firms follow the pecking order theory. They use their profit as an internal fund and use their tangible assets as collateral in order to attract debt if their internal fund is insufficient. Besides this, Dutch listed firms which do have a free cash flow, use their tangible assets also as collateral in order to reduce their free cash flow. The results show that there is no difference between the firms who will overinvest and the firms who will under invest. The presence of priority shares in Dutch organizations is the takeover defense which do have the most influence on the debt ratio. The preferred shares are only related to leverage under the agency cost theory and the certificates in the pooled sample in the case of underinvestment. All the other variables which were tested, were not significant.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:https://purl.utwente.nl/essays/63896
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