Trends & Determinants of Capital Structure of U.K. Firms

Vora, Rajan (2009) Trends & Determinants of Capital Structure of U.K. Firms. [Dissertation (University of Nottingham only)] (Unpublished)

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This paper investigates the determinants of capital structure in firms from the United Kingdom. It aims

to determine which of the theories of capital structure is most relevant and applicable to these firms. It

intends to compare the results to previous empirical and theoretical predictions. The study includes 81

companies from 10 different industries from 8 different years from 2001-2008. A panel data regression

and an ANOVA test is run to analyze what are the determinants of a firm’s short term and long term

leverage and how do these determinants influence the capital structure decisions. The impact of

industry classification is also captured by the ANOVA test. The industries are introduced as

dummy variables in the analysis. Each of the tests are run on Long-Term Leverage as well as

Short-Term Leverage as dependent variables. Firm Size, Profitability, Asset Tangibility, Growth

Opportunities, Non-Debt Tax Shields and Volatility are the independent variables included.

Most of the factors follow the predictions of the Pecking Order Theory of Capital Structure. This

states that firms follow a certain order in order to raise finance. However no conclusive

evidence is found supporting one single theory that can explain the capital structure decisions

of a firm in the United Kingdom. The determinants still remain a puzzle which would be

debatable for years to come.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 03 Feb 2010 14:33
Last Modified: 25 Oct 2016 12:52

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