The determinants of capital structure

the case of long-term debt constraint for Jordanian firms

Rami Zeitun, Gary Tian*

*Corresponding author for this work

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper contributes to the capital structure literature by investigating the determinants of capital structure of Jordanian companies with the constraint of inadequate long-term debt as their source of financing and regional risk. We firstly document that Jordanian companies mostly depend on short-term debt, as a result of the banking credit policy that promotes short-term debt. Our results suggest that the level of gearing in Jordanian firms is positively related to size, tangibility, and earning volatility, and negatively correlated to profitability, the level of growth opportunities, liquidity and stock market activities. The level of gearing measured by short-term debt is, however, negatively correlated to tangibility. The Gulf Crisis between 1990 and 1991 is also found to have a significant but positive impact on Jordanian corporate leverage. We conclude that the capital structure decision with inadequate long-term debt access is influenced more strongly by factors such as Stock's Market activity (SMA).

Original languageEnglish
Pages (from-to)22-37
Number of pages16
JournalCorporate Ownership and Control
Volume6
Issue number1 A
Publication statusPublished - 2008
Externally publishedYes

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