Determinants of Capital Structure in Non-Financial Companies

In this paper, we evaluate firm-, industry- and country-specific
factors determining a firm's capital structure. The empirical
validity of several capital structure theories has been ambiguous
so far. We shed light on the main drivers of leverage and depict
differences in industry and country characteristics. Using a short
panel data set with a large cross-section, we are able to show that
firm size, industry leverage, industry growth and tax shield
positively affect leverage ratios, while profitability and
liquidity have negative impacts. Moreover, our model is an
improvement over Rajan and Zingales' (1995) four-factor core model
in terms of explaining data variation. The results are robust
against different panel estimators, decompositions and over time.