The Capital Structure Difference Across Australian Companies

The impact of product warranties on the capital structure of Australian firms

“…Earnings volatility and industry concentration are unrelated to leverage. These findings are consistent with earlier Australian studies such as Deesomsak, et al (2004), Qiu and La (2009) and Cassar and Holmes (2003).…”

“…This is consistent with the findings of international studies [(Long and Malitz, 1985;Smith and Watts, 1992;Barclay, Smith and Watts, 1995;Barclay and Smith, 1999) cited in Myers (2001, p. 83)]. The Australian literature again provides inconclusive results; Qiu and La (2009) find that firms with valuable growth opportunities tend to have low debt ratios, Cassar and Holmes (2003) find that debt ratio is positively related to growth, and Deesomsak, et al (2004) find that growth does not relate to leverage in Australian firms.…”

“…Relative to the Australian capital structure literature, these results are counter to Deesomsak, et al (2004) who find that profitability does not relate to leverage in Australian firms. However, the negative relationship between debt level and profitability is consistent with both Qiu and La (2009) and Cassar and Holmes (2003).…”

“…The coefficients on ROA Volatility (measure of risk) are not statistically significant. This result is consistent with Deesomsak, et al (2004), but inconsistent with Qiu and La (2009) and Bradley, et al (1984) who report that risk (measured as the unlevered beta of equity in Qiu and La (2009) and measured as volatility of earnings in Bradley, et al, (1984)) is negatively related to debt ratio.…”

“…The authors note, however, that country-specific legal and institutional environments may impact capital structure. Qiu and La (2009) compare capital structures across Australian firms by examining firmspecific characteristics for 367 firms over the period 1992-2006. Australian firms carrying no debt tend to have lower proportions of tangible assets, higher growth potential, a relatively smaller size, less profit, and more risk than levered firms.…”