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Firm-specific determinants of capital structure : evidence on UK listed and unlisted firms

Berg, Bas van den (2021) Firm-specific determinants of capital structure : evidence on UK listed and unlisted firms.

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Abstract:This study investigates to what extent firm-specific determinants of capital structure help to explain the degree of leverage used in firms in the United Kingdom. Data is acquired from the ORBIS-database based on a random sample. The final sample includes 12169 listed and unlisted firms in the UK firms covering the years 2014-2018. Based on the pecking-order-, trade-off- and agency theory several hypotheses are formed regarding the firm-specific determinants used, which are tested through ordinary-least-squares regression. The results show that based on the empirical model a moderate amount of variation in leverage is explained, with profitability, tangibility and liquidity being the most important firm-specific determinants of capital structure for firms in the United Kingdom. Practically significant results are also found for firm size, non-debt tax shields, risk, stock listing and age, although these are of less importance than profitability, tangibility and liquidity. No practically significant and consistent evidence is found for growth and tax shields. Overall, it appears that the pecking-order theory explains the most amount of variation in leverage.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics, 85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/85557
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