Capital structure determinants : an inter-industry analysis for Dutch firms

This paper will reflect on several propositions that are made in respect to the capital structure choice of firms. This paper has been motivated by the importance of the capital structure choice to firms as well as the apparent lack of evidence for Dutch firms that link theory to practice. The study aims to identify the most important determinants of capital structure within Dutch firms. It will also assess if there is an inter-industry variation. Mixed results with respect to the theory are reported. The results indicate that the capital structure in Dutch firms demonstrate mixed characteristics of both pecking order theory as well as some traits of the trade-off theory. Profitability appears to be negatively related to leverage as well as, Non debt tax shields and business risk. Profitability and size appear to be positively related to leverage. Finally there appears to be an industry variation among the industries that are identified.