This paper examines the impact of Australian firms’ warranty policies on capital structure. The sample consists of 378 firms and 1727 firm-years for Australian public firms for the period 2006–2010. The results suggest that warranty policies impact on Australian firms’ capital structures. Firms offering product warranties to customers have less leverage than those firms that do not. Firms commit to honour warranty contracts, whether explicit or implicit, by selecting lower leverage levels.

This paper examines the impact of Australian firms' warranty policies on their capital structures. The sample consists of 261 firms and 937 firm-years for Australian public firms for the period 2007-2010. The results suggest that warranty policies impact on Australian firms' capital structures. Consistent with earlier Australian studies, size and asset tangibility are positively related to leverage; growth and profitability are negatively related to leverage; and earnings volatility and industry concentration are unrelated to leverage. In addition to these previously identified relationships, the firms' warranty policies have a negative impact on leverage.