Review of related literature
| Authors | Country | DV | IV | Sample | Period | Results | |
|---|---|---|---|---|---|---|---|
| Khan et al. (2020) | Pakistan | Leverage | “Liquidity, profitability, age, tangibility” | 183 firms | 2008–2017 | The research result found tangibility, profitability and age to be positively related to leverage among listed firms in Pakistan. However, size and liquidity are negatively related to leverage | |
| Kyissima et al. (2019) | China | “Book leverage, market leverage and net leverage” | “Size, profitability and tangibility” | 716 firms | 1990–2013 | Capital structure is significantly affected by profitability, investment opportunities and firm’s size | |
| Yildirim et al. (2018) | US, UK, Canada, Japan, Taiwan, South Korea and India | “Book leverage and market leverage” | “Profitability, growth O, firm size, tangibility, business risk, GDP and growth” | 756 | 2004–2014 | Most of the determinants do exhibit different effects among both firm types. Depending on the leverage measure, the effect of different independent variables on firms’ capital structure varies | |
| Sofat and Singh (2017) | India | Debt equity ratio | “Firm size, asset composition/tangibility, debt service, capacity, business risk and Profitability” | 100 firms | 2003–2012 | Asset composition, business risk and return on assets are positively related to debt ratio whereas; firm size and debt service capacity are negatively related to debt ratio | |
| El-Khatib (2017) | Saudi Arabia, United Arab Emirates and Qatar | “Ratio of debt to market equity, debt to book equity, long term debt to market equity and long term debt to book equity” | “Tangibility, market to book ratio, profitability, size, financial deficit and age” | 100 firms | 2005–2014 | Conventional leverage is significantly influenced by some determinants such as tendency to pay dividends, firm’s size, tangibility, profitability and age | |
| Güner (2016) | Turkey | Leverage | “Size, growth opportunities, non-debt tax shields, profitability and liquidity” | 131 firms | 2008–2014 | Companies that have a free float rate between 50% and 75% have lower degrees of leverage | |
| Bandyopadhyay and Barua (2016) | India | “Total borrowings to total assets, short term bank, borrowings to total, borrowings, long term borrowings to total assets, bank borrowings to total assets, long term bank borrowings to total borrowings” | “Firm age, firm size, tangibility, turnover, liquidity, price to book ratio, sales volatility, intercept” | 1,594 firms | 1998 to 2011 | Financing decisions are widely influenced by macro-economic cycle | |
| Chadha and Sharma (2015) | India | “Total debt to total capital and total debt to total assets” | “Size, age, growth, tang, profitability, risk, dividend payout ratio, NDTS, liquidity, uniqueness, ICR, CFCR, ownership, inflation and GDP” | 422 firms | 2004–2012 | Leverage has a significant relationship with “size, age, asset tangibility, growth, profitability, non-debt tax shield, business risk, uniqueness and ownership structure | |
| Rouf (2015) | Bangladesh | “Total liabilities divided by total assets” | “Total assets (TA), total sales (TSE), return on assets (ROA), return on sales (ROS), liquidity, age, debt-to-equity ratio, current debt ratio, proprietary of equity ratio” | 106 firms | 2011–2015 | There is a negative and significant relationship between leverage and ROA, size and AGE | |
| Gómez et al. (2014) | Peru | “Long-term liabilities to total assets ratio” | “Profitability, size, business risk, collateral assets value, depreciation to total assets ratio, growth and liquidity” | 64 firms | 2004– 2008 | The level of firms’ long-term debt is significantly influenced by their size, profitability, non-debt tax shields and collateral value of assets | |
| Benkraiem and Gurau (2013) | French | “Total, long-term and short-term debt” | “Size, profitability, growth and tangibility” | 2003 and 2006 | Capital structure is significantly affected by size, profitability, growth and tangibility of assets | ||
| Matemilola et al. (2013) | South Africa | “Long term debt and total debt” | “Fixed assets, net profit, size, growth opportunity and non-debt tax shield” | 600 | 2004–2009 | The empirical findings indicate that models that include unobservable firm-specific effects are correctly specified | |
| Sbeiti (2010) | Kuwait, Saudi Arabia and Oman | “Book leverage and market leverage” | “Firm size, liquidity, profitability, tangibility and growth opportunities” | 142 firms | 1998–2005 | Capital structure in the selected countries is not different from finance models of the developed countries | |
| Morri and Cristanziani, (2009) | Europe | “Total debt/total equity, total debt/total asset, total liabilities/total asset, total debt/capital, short-term debt/total debt, long-term debt/total debt, short-term debt/total asset” | “Size, profitability, growth opportunities, cost of debt, ownership structure, risk and category” | 97 companies | Non-REIT companies are significantly more leveraged than REITs. The negative relationship between operating risk and leverage demonstrates that the managers of riskier firms tend to reduce the overall company’s uncertainty by adopting a more careful capital structure | ||
| Kim and Berger (2008) | Korea and USA | “Market value-based leverage ratio” | “Profit, company size, non-debt tax shields, growth and business-risk” | 36 firms | 1987–1991 | There is no significant difference between Korean and Japanese firms | |
| Source: Prepared by the authors based on literature survey | |||||||
| Authors | Country | DV | IV | Sample | Period | Results | |
|---|---|---|---|---|---|---|---|
| Pakistan | Leverage | “Liquidity, profitability, age, tangibility” | 183 | 2008–2017 | The research result found tangibility, profitability and age to be positively related to leverage among listed firms in Pakistan. However, size and liquidity are negatively related to leverage | ||
| China | “Book leverage, market leverage and net leverage” | “Size, profitability and tangibility” | 716 firms | 1990–2013 | Capital structure is significantly affected by profitability, investment opportunities and firm’s size | ||
| US, UK, Canada, Japan, Taiwan, South Korea and India | “Book leverage and market leverage” | “Profitability, growth O, firm size, tangibility, business risk, GDP and growth” | 756 | 2004–2014 | Most of the determinants do exhibit different effects among both firm types. Depending on the leverage measure, the effect of different independent variables on firms’ capital structure varies | ||
| India | Debt equity ratio | “Firm size, asset composition/tangibility, debt service, capacity, business risk and Profitability” | 100 firms | 2003–2012 | Asset composition, business risk and return on assets are positively related to debt ratio whereas; firm size and debt service capacity are negatively related to debt ratio | ||
| Saudi Arabia, United Arab Emirates and | “Ratio of debt to market equity, debt to book equity, long term debt to market equity and long term debt to book equity” | “Tangibility, market to book ratio, profitability, size, financial deficit and age” | 100 firms | 2005–2014 | Conventional leverage is significantly influenced by some determinants such as tendency to pay dividends, firm’s size, tangibility, profitability and age | ||
| Turkey | Leverage | “Size, growth opportunities, non-debt tax shields, profitability and liquidity” | 131 firms | 2008–2014 | Companies that have a free float rate between 50% and 75% have lower degrees of leverage | ||
| India | “Total borrowings to total assets, short term bank, borrowings to total, borrowings, long term borrowings to total assets, bank borrowings to total assets, long term bank borrowings to total borrowings” | “Firm age, firm size, tangibility, turnover, liquidity, price to book | 1,594 firms | 1998 to 2011 | Financing decisions are widely influenced by macro-economic cycle | ||
| India | “Total debt to total capital and total debt to total assets” | “Size, age, growth, tang, profitability, risk, dividend payout ratio, NDTS, liquidity, uniqueness, ICR, CFCR, ownership, inflation and GDP” | 422 firms | 2004–2012 | Leverage has a significant relationship with “size, age, asset tangibility, growth, profitability, non-debt tax shield, business risk, uniqueness and ownership structure | ||
| Bangladesh | “Total liabilities divided by total assets” | “Total assets (TA), total sales (TSE), return on assets (ROA), return on sales (ROS), liquidity, age, debt-to-equity ratio, current debt ratio, proprietary of equity ratio” | 106 firms | 2011–2015 | There is a negative and significant relationship between leverage and ROA, size and AGE | ||
| Peru | “Long-term liabilities to total assets ratio” | “Profitability, size, business risk, collateral assets value, depreciation to total assets ratio, growth and liquidity” | 64 firms | 2004– 2008 | The level of firms’ long-term debt is significantly influenced by their size, profitability, non-debt tax shields and collateral value of assets | ||
| French | “Total, long-term | “Size, profitability, growth and tangibility” | 2003 | Capital structure is significantly affected by size, profitability, growth and tangibility of assets | |||
| South Africa | “Long term debt and total debt” | “Fixed assets, net profit, size, growth opportunity and non-debt tax shield” | 600 | 2004–2009 | The empirical findings indicate that models that include unobservable firm-specific effects are correctly specified | ||
| Kuwait, Saudi Arabia and Oman | “Book leverage and market leverage” | “Firm size, liquidity, profitability, tangibility and growth opportunities” | 142 firms | 1998–2005 | Capital structure in the selected countries is not different from finance models of the developed countries | ||
| Europe | “Total debt/total equity, total debt/total asset, total liabilities/total asset, total debt/capital, short-term debt/total debt, long-term debt/total debt, short-term debt/total asset” | “Size, profitability, growth opportunities, cost of debt, ownership structure, risk and category” | 97 companies | Non-REIT companies are significantly more leveraged than REITs. The negative relationship between operating risk and leverage demonstrates that the managers of riskier firms tend to reduce the overall company’s uncertainty by adopting a more careful capital structure | |||
| Korea and USA | “Market value-based | “Profit, company size, non-debt tax shields, growth and business-risk” | 36 firms | 1987–1991 | There is no significant difference between Korean and Japanese firms | ||