The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions

By A. Antoniou, Yilmaz Guney, Krishna Paudyal. Journal of Financial and Quantitative Analysis, 2008

872 citations recorded by the source corpus.

Abstract The paper investigates how firms operating in capital market-oriented economies (the U.K. and the U.S.) and bank-oriented economies (France, Germany, and Japan) determine their capital structure. Using panel data and a two-step system-GMM procedure, the paper finds that the leverage ratio is positively affected by the tangibility of assets and the size of the firm, but declines with an increase in firm profitability, growth opportunities, and share price performance in both types of economies. The leverage ratio is also affected by the market conditions in which the firm operates. The degree and effectiveness of these determinants are dependent on the country's legal and financial traditions. The results also confirm that firms have target leverage ratioswith French firms being the fastest in adjusting their capital structure toward their target level and Japanese firms the slowest. Overall, the capital structure of a firm is heavily influenced by the economic environment and its institutions, corporate governance practices, tax systems, the borrower-lender relation, exposure to capital markets, and the level of investor protection in the country in which the firm operates.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/6e761b7f2d018ebbc03ba165181b74e5581f10af

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Citations in the corpus

Capital Structure Choice and Company Taxation: A Meta-Study (2013, neutral): “3% of our primary estimates refer to long-term debt, 11 Studies which estimate a dynamic model of the capital structure choice comprise Fama and French (2002), Flannery and Rangan (2006), Antoniou et al. (2008), Lemmon et al. (2008) and Huang and Ritter (2009).”
Capital structure decisions in family firms: empirical evidence from a bank-based economy (2011, positive): “2Antoniou et al. (2008), p.”
The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies (2018, background): “In other words, seen in terms of indebtedness, the leverage is lower when the firms are profitable (Fama and French 2002), and seen in terms of profitability, it is higher when the firms have more investment opportunities (Antoniou et al. 2008).”
Capital Structure Decisions around the World: Which Factors Are Reliably Important? (2015, background): “…aspects of the determinants of capital structure and the role of particular countries’ institutional characteristics in this determination (Rajan and Zingales (1995), Booth, Aivazian, Demirg¨uc¸-Kunt, and Maksimovic (2001), Antoniou, Guney, and Paudyal (2008), and Fan, Titman, and Twite (2012)).”
In Search of Robust Methods for Dynamic Panel Data Models in Empirical Corporate Finance (2015, positive): “In estimating (1), most corporate finance studies adopt a one-stage procedure (e.g., Flannery and Rangan, 2006; Antoniou et al., 2008), which involves substituting yit = θ xit into (1) to yield the following model: yit = γyi,t−1 +β xit +ηi + vit , (2) where γ = 1− δ and β = δθ .”
The relationship between product market competition and capital structure in Chinese listed firms (2011, neutral): “See Table 2 for variable definitions.”
The effect of firm size on the leverage–performance relationship during the financial crisis of 2007–2009 (2015, neutral): “While prior studies, such as Antoniou et al. (2008), examine the effect of firm size on leverage or performance, they generally do not investigate the possible interactive effect between leverage and firm size on operating performance.”
Asymmetric Capital Structure Adjustments: New Evidence from Dynamic Panel Threshold Models (2012, methodology): “Following previous studies (e.g., Ozkan, 2001; Antoniou et al., 2008; Dang, 2011), we applied a number of standard data restrictions.”
Institutional Investors and Institutional Environment: A Comparative Analysis and Review (2010, background): “Therefore, the motives and actions of institutional owners can only be understood in the context of the countries’ financial systems and institutions (Antoniou et al., 2008).”
Earnings Management, Capital Structure and the Role of Institutional Environments (2016, background): “In sum, the results of the firm and industry characteristics are consistent with Titman and Wessels (1988), Lemmon et al. (2008), Antoniou et al. (2008), and Fan et al. (2012).”
Institutional Determinants of Capital Structure Adjustment Speeds (2012, background): “Antoniou, Guney, and Paudyal (2008) provide an empirical analysis.”