Capital structure determinants. The Iberian Peninsula case

Abstract

A brief review of financial literature on corporate capital structure theories and an investigation of capital structure choice determinants for Portuguese and Spanish public firms is presented in this paper. The data set are collected from WorldScope Database and comprise 180 firms (52 Portuguese firms and 128 Spanish firms) for a period of 11 years - between 1992 to 2003. A two-step multivariate process is used in order to identify the capital structure determinants of those firms. In the first step we used exploratory factor analysis to measure attributes to explain the variation in leverage ratios across firms. In the second step, the relationship between several ratios of leverage and the attributes obtained is estimated using regression analysis. Results suggest that capital structure choice is influenced by firm size. Non-debt tax shield was identified as a negative impact on total debt.