Leverage determinants in the absence of corporate tax system: the case of non‐financial publicly traded corporations in Saudi Arabia

Abstract

Reviews previous research on the factors affecting the proportions of debt and equity used to finance firms, describes the Saudi Arabian tax system (based on net worth) and stock market; and examines the capital structure 1993‐1997 of a sample of 35 publicly traded Saudi companies. Uses multi‐linear regression models to investigate the relationships between capital structure and other variables in 5 sectors and illustrates their varied leverage ratios. Discusses and analyses the positive links between leverage ratios, firm size and share of government ownership; and negative links with growth, return on assets and profitability margin.

Proceedings of the 7th International Conference on Business and Finance

“…Especially with the free zone companies in Ghana most of the larger companies are multinational companies and are financed by their parent companies on long-term debt. This finding of positive relationship of long-term debt and size is consistent with previous findings (Abor 2008;Al-Sakran 2001;Barclay & Smith 1996;Barton et al 1989;Friend & Lang 1988;Hovakimian et al 2004;Kim et al 1998;MacKie-Mason 1990).…”

Capital structure and company performance: The case of free zone companies in Ghana

“…Especially with the free zone companies in Ghana most of the larger companies are multinational companies and are financed by their parent companies on long-term debt. This finding of positive relationship of long-term debt and size is consistent with previous findings (Abor 2008;Al-Sakran 2001;Barclay & Smith 1996;Barton et al 1989;Friend & Lang 1988;Hovakimian et al 2004;Kim et al 1998;MacKie-Mason 1990).…”

Determinants of Capital Structure: Empirical Evidence from Large Taxpayer Share Companies in Ethiopia

“…When we see most empirical studies on capital structure they reveal a negative correlation between profitability and leverage of a firm, which is consistent with the pecking order theory, for example the work of Titman and Wessels (1988); Rajan and Zingales (1995); Bevan and Danbolt (2002); Antoniou, Guney and Paudyal (2002) from developed countries and the study of Wiwattanakantang (1999); Pandy (2001); Booth et al (2001); Al-Sakran (2001);Chen (2004) from developing countries find a negative relationship between profitability and leverage.…”

“…In addition to this, many research findings show that the size of a firm positively influences the leverage ratio. Wiwattanakantang (1999); Booth et al (2001);Al-Sakran (2001);Pandy (2001); Huang and Song (2002) discover a significant positive association between size and leverage ratio in developing countries. Whereas, Rajan and Zingales (1995) suggests that as a result of less asymmetric information about the larger companies, it diminishes the chance of undervaluation of the new equity issue.…”