THE DETERMINANTS OF CAPITAL STRUCTURE: EVIDENCE FROM FIRMS LISTED ON FTSE-ALL SHARE INDEXTools Reece, Nicholas, Mark (2017) THE DETERMINANTS OF CAPITAL STRUCTURE: EVIDENCE FROM FIRMS LISTED ON FTSE-ALL SHARE INDEX. [Dissertation (University of Nottingham only)]
AbstractThis research paper enhances the extant capital structure literature on UK firms by examining the firm specific characteristics which are the determinants of capital structure of 186 firms listed on the FTSE-All Share index. Additionally, the paper investigates the effect of 2007/2008 financial crisis on the debt-equity mix of UK firms. In general, the results from the fixed effects model are consistent with the capital structure theories reviewed and empirical studies from the UK. Consequently, the study reveals that non-debt tax-shields and growth opportunities show positive relationships with all three leverage ratios while the profitability displays a negative relationship with all three leverage ratios. However, the three other capital structure determinants show mixed results with respect to three leverage ratios. Despite this, they still match the theoretical predictions of the capital structure theories. Furthermore, when the crisis dummy variable is added to the original regression model, it exhibits a positive relationship with all three leverage ratios. This indicates that UK firms leverage ratios increased significantly during the financial crisis of 2007/2008. Overall, the study shows that UK firms do not follow any specific capital structure but it does illustrate the significance of several firm-specific characteristics to capital structure decisions.
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