Structure theories: Panel data evidence from the United Kingdom

Abstract

The purpose of this study is to identify the factors affecting the capital structure of UK quoted companies during 2000-2012, based on the main theories of capital structure. We try to find out which of these theories (trade-off theory, agency cost theory, pecking-order theory) are best suited for empirical explanation of the capital structure of the UK firms. Therefore, the case for consideration in this study is to analyze the variables for each of the theories and examine which one best explains the index of long-term debt leverage. We use the method of panel data with random effect. This paper's differentiation turned out that in UK the investment companies have no impact on their borrowing levels, thus lending mainly serves their current liabilities. Our findings are more consistent with the trade-off theory.

Factors Affecting Capital Structure Decisions: A Comparative Study of Listed Firms in Egypt and Nigeria

“…In addition, the deflated return has a strong negative association with leverage ratios. The findings are in line with the results of M'ng, Rahman & Sannacy (2017); Kieschnick& Moussawi,2018; Uysal (2011); Chung et al, (2018) and Vortelinosa et al, (2016). Stock returns were found to have a substantial role in explaining book leverage of capital structure long and short terms of the capital structure with no impact.…”

“…In addition, market to book ratio has a significant positive effect on the capital structure (book leverage and short-term capital) of listed firms in Nigeria. The findings are in line with the results of M'ng, Rahman & Sannacy (2017); Kieschnick& Moussawi, 2018; Uysal (2011); Chung et al, (2018), andVortelinosa et al, (2016). A higher market-to-book ratio reflects a reduction in leverage as Egyptian firms use equity issues to take advantage of equity mispricing.…”

“…Thus, the deflated return has a strong negative effect with leverage ratios. The findings are in line with the results of M'ng, Rahman & Sannacy (2017);Kieschnick& Moussawi,2018;Uysal (2011); Chung et al, (2018) ,and Vortelinosa et al, (2016. When the present deflated return is high, managers will be hesitant to issue more debt because of the uncertainty about the future which might be a trigger for additional debt issuance while also acting as a proxy for reducing the value of the investment.…”