Three Industry Characteristics Affecting Capital Structure: Review of Literature

Research Article
Open access

Three Industry Characteristics Affecting Capital Structure: Review of Literature

Zhuoxing Li 1* , Dong Liu 2
  • 1 Xi’an Jiaotong University    
  • 2 Shenzhen College of International Education    
  • *corresponding author 783736877@qq.com
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/18/20230062
AEMPS Vol.18
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-79-9
ISBN (Online): 978-1-915371-80-5

Abstract

This paper summarizes the literature that studies the impact of industry characteristics on capital structure, and focuses on three factors, namely, growth opportunities, tangibility and firm size. We find that most literature supports the following conclusions: growth opportunities are negatively correlated with leverage, tangible assets are positively correlated with leverage, and enterprise size is positively correlated with debt level. At the same time, we find some limitations in previous studies. For example, scholars generally use linear regression as research method, and focus more on developed countries rather than on developing countries. According to these current situations, we give several suggestions for future research directions.

Keywords:

growth opportunities, tangibility, firm size

Li,Z.;Liu,D. (2023). Three Industry Characteristics Affecting Capital Structure: Review of Literature. Advances in Economics, Management and Political Sciences,18,114-120.
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References

[1]. Billett, M. T., King, T. H. D., & Mauer, D. C. (2007). Growth opportunities and the choice of leverage, debt maturity, and covenants. The Journal of Finance, 62(2), 697-730.

[2]. Nha, B. D., Bich Loan, N. T., & Nhung, N. T. T. (2016). Determinants of capital structure choice: Empirical evidence from Vietnamese listed companies. Society and Economy, 38(1), 29-45.

[3]. Rajan, R. G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. The Journal of Finance, 50(5), 1421-1460.

[4]. Huang, G. (2006). The determinants of capital structure: Evidence from China. China economic review, 17(1), 14-36.

[5]. Wiwattanakantang, Y. (1999). An empirical study on the determinants of the capital structure of Thai firms. Pacific-Basin Finance Journal, 7(3-4), 371-403.

[6]. Serghiescu, L., & Văidean, V. L. (2014). Determinant factors of the capital structure of a firm-an empirical analysis. Procedia Economics and Finance, 15, 1447-1457.

[7]. Kurshev, A., & Strebulaev, I. A. (2015). Firm size and capital structure. Quarterly Journal of Finance, 5(03), 1550008.

[8]. Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance, 43(1), 1-19.

[9]. Shah, A., Hijazi, T., & Javed, A. Y. (2004). The determinants of capital structure of stock exchange-listed non-financial firms in Pakistan [with comments]. The Pakistan Development Review, 605-618.

[10]. Stewart C. Myers (1984). The Capital Structure Puzzle, on The Journal of Finance, Vol. XXXIX, No.3. July 1984.

[11]. Joon Chae (2005). Trading Volume, Information Asymmetry, and timing Information, on The Journal of Finance, Feb. 2005, Vol. 60, No.1 (Feb, 2005), pp. 413-442.

[12]. Kurshev, A., & Strebulaev, I. A. (2015). Firm size and capital structure. Quarterly Journal of Finance, 5(03), 1550008.

[13]. Eriotis, N., Vasiliou, D., & Ventoura‐Neokosmidi, Z. (2007). How firm characteristics affect capital structure: an empirical study. Managerial Finance.

[14]. Sanil, H. S., bin Noraidi, A. A. A., & Ramakrishnan, S. (2018). The Impact of Different Firm Sizes on Capital Structure Determinants Among Listed Consumer Product Firms In Malaysia. Journal of Economic Info, 5(2), 1-6.

[15]. Karadeniz, E., Kandır, S. Y., Iskenderoglu, O., & Onal, Y. B. (2011). Firm size and capital structure decisions: Evidence from Turkish lodging companies. International Journal of Economics and Financial Issues, 1(1), 1-11.

[16]. González, V. M., & González, F. (2012). Firm size and capital structure: Evidence using dynamic panel data. Applied Economics, 44(36), 4745-4754.

[17]. Akdal, S. (2011). How do firm characteristics affect capital structure? Some UK evidence. Some UK Evidence (March 3, 2011).

[18]. Mouamer, F. M. A. (2011). The determinants of capital structure of Palestine‐listed companies. The Journal of Risk Finance.

[19]. Fama, E. F., & French, K. R. (2002). Testing trade-off and pecking order predictions about dividends and debt. The review of financial studies, 15(1), 1-33.

[20]. Norden, L., & van Kampen, S. (2013). Corporate leverage and the collateral channel. Journal of Banking & Finance, 37(12), 5062-5072.

Cite this article

Li,Z.;Liu,D. (2023). Three Industry Characteristics Affecting Capital Structure: Review of Literature. Advances in Economics, Management and Political Sciences,18,114-120.

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The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

ISBN：978-1-915371-79-9(Print) / 978-1-915371-80-5(Online)
Editor：Canh Thien Dang, Javier Cifuentes-Faura
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.18
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Billett, M. T., King, T. H. D., & Mauer, D. C. (2007). Growth opportunities and the choice of leverage, debt maturity, and covenants. The Journal of Finance, 62(2), 697-730.

[2]. Nha, B. D., Bich Loan, N. T., & Nhung, N. T. T. (2016). Determinants of capital structure choice: Empirical evidence from Vietnamese listed companies. Society and Economy, 38(1), 29-45.

[3]. Rajan, R. G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. The Journal of Finance, 50(5), 1421-1460.

[4]. Huang, G. (2006). The determinants of capital structure: Evidence from China. China economic review, 17(1), 14-36.

[5]. Wiwattanakantang, Y. (1999). An empirical study on the determinants of the capital structure of Thai firms. Pacific-Basin Finance Journal, 7(3-4), 371-403.

[6]. Serghiescu, L., & Văidean, V. L. (2014). Determinant factors of the capital structure of a firm-an empirical analysis. Procedia Economics and Finance, 15, 1447-1457.

[7]. Kurshev, A., & Strebulaev, I. A. (2015). Firm size and capital structure. Quarterly Journal of Finance, 5(03), 1550008.

[8]. Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance, 43(1), 1-19.

[9]. Shah, A., Hijazi, T., & Javed, A. Y. (2004). The determinants of capital structure of stock exchange-listed non-financial firms in Pakistan [with comments]. The Pakistan Development Review, 605-618.

[10]. Stewart C. Myers (1984). The Capital Structure Puzzle, on The Journal of Finance, Vol. XXXIX, No.3. July 1984.

[11]. Joon Chae (2005). Trading Volume, Information Asymmetry, and timing Information, on The Journal of Finance, Feb. 2005, Vol. 60, No.1 (Feb, 2005), pp. 413-442.

[12]. Kurshev, A., & Strebulaev, I. A. (2015). Firm size and capital structure. Quarterly Journal of Finance, 5(03), 1550008.

[13]. Eriotis, N., Vasiliou, D., & Ventoura‐Neokosmidi, Z. (2007). How firm characteristics affect capital structure: an empirical study. Managerial Finance.

[14]. Sanil, H. S., bin Noraidi, A. A. A., & Ramakrishnan, S. (2018). The Impact of Different Firm Sizes on Capital Structure Determinants Among Listed Consumer Product Firms In Malaysia. Journal of Economic Info, 5(2), 1-6.

[15]. Karadeniz, E., Kandır, S. Y., Iskenderoglu, O., & Onal, Y. B. (2011). Firm size and capital structure decisions: Evidence from Turkish lodging companies. International Journal of Economics and Financial Issues, 1(1), 1-11.

[16]. González, V. M., & González, F. (2012). Firm size and capital structure: Evidence using dynamic panel data. Applied Economics, 44(36), 4745-4754.

[17]. Akdal, S. (2011). How do firm characteristics affect capital structure? Some UK evidence. Some UK Evidence (March 3, 2011).

[18]. Mouamer, F. M. A. (2011). The determinants of capital structure of Palestine‐listed companies. The Journal of Risk Finance.

[19]. Fama, E. F., & French, K. R. (2002). Testing trade-off and pecking order predictions about dividends and debt. The review of financial studies, 15(1), 1-33.

[20]. Norden, L., & van Kampen, S. (2013). Corporate leverage and the collateral channel. Journal of Banking & Finance, 37(12), 5062-5072.

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