Open AccessDeterminants of the Capital Structure of Brazilian Companies: An Empirical Analysis of Pecking Order and Trade-Off Theories in 2005 and 2014
Author(s) -
Marcelo Rabelo Henrique,
Sandro Braz Silva,
Wendell Alves Soares,
Sérgio Roberto da Silva
Publication year - 2018
Publication title -
revista ibero-americana de estratégia
Language(s) - English
Resource type - Journals
ISSN - 2176-0756
DOI - 10.5585/ijsm.v17i1.2542
Subject(s) - capital structure , pecking order theory , debt ratio , debt , market liquidity , monetary economics , economics , asset (computer security) , return on capital , financial economics , business , finance , financial capital , capital formation , human capital , computer security , computer science , economic growth
This study investigates the determinants of capital structure, using multiple regression technique data for a sample of 723 companies from various sectors of the Brazilian economy between 2005 and 2014 in order to determine the relative importance of the factors specific company. The theory of pecking order provides the existence of a hierarchy in the use of funding sources, while the trade-off theory considers the existence of a target capital structure that would be pursued by the company. Twelve financial variables were used in which five were dependent (related to indebtedness) and seven independent variables (explanatory of the determinants of capital structure). These were: a) indebtedness: Total Indebtedness; Short-term debt; Long-term debt; Costly Financial debt Short-term; and Financial Debt Costly Long-term; b) Determinants of Capital Structure: Current liquidity; Tangibility; Return on assets; Return to Investors; Payment level of income tax; Sales Growth; and Asset Growth. The main results of this study as a contribution were: a) positive relationships in asset tangibility and negative for asset returns; b) the current ratio is negatively related with the debt indicators; c) the return to investors could not confirm their relationship with debt indicators; d) growth of assets is positively related to short-term debt and negatively related to the indebtedness of short and long onerous financial terms; e) sales growth is negatively related to the debt indicators; f) the level of income tax payment showed a positive relationship with the short-term debt, it is not possible to compare it to other levels of indebtedness.