Advertisement

The Firm-Specific Determinants of Capital Structure in Beverage Industry in Europe

  • İlhan Dalci
  • Hasan OzyapiciEmail author
  • Doğan Unlucan
Conference paper
Part of the Springer Proceedings in Business and Economics book series (SPBE)

Abstract

This study investigates the firm-specific capital structure determinants for the listed firms operating in the beverage industry in Europe. The financial data related to the period 2010–2018 are obtained from Orbis. A total of 83 companies with 747 observations are used. According to the results, profitability is negatively correlated with total debt ratio, long-term debt ratio, and short-term debt ratio. Tangibility and liquidity are also negatively correlated with both total debt ratio and short-term debt ratio. Also, it is found that growth has a statistically significant negative impact on both total debt ratio and long-term debt ratio. On the other hand, the results underline that non-debt tax-shield is positively correlated with total debt ratio and short-term debt ratio. Similarly, size is positively correlated with both total debt ratio and long-term debt ratio. To sum up, growth, tangibility, liquidity, profitability, size, and non-debt tax shield have statistically significant influences on debt ratios. This study may help managers and policy makers interested in capital structure determinants to make accurate decisions. Creditors may also utilize this study to analyze the capital structure of borrowers while they are considering the issues related to lending money.

Keywords

Beverage industry Capital structure Debt Profitability 

References

  1. Ahsan, T., Wang, M., & Qureshi, M. A. (2016). Firm, industry, and country level determinants of capital structure: Evidence from Pakistan. South Asian Journal of Global Business Research, 5(3), 362–384.Google Scholar
  2. Alom, K. (2013). Capital structure choice of Bangladeshi firm—An empirical investigation. Asian Journal of Finance and Accounting, 5(1), 320–334.Google Scholar
  3. Baltagi, B. H. (2005). Econometric analysis of panel data (3rd ed.). New York: John Wiley & Sons Inc.Google Scholar
  4. Bancel, F., & Mitto, U. R. (2004). Cross country determinants of capital structure choice: A survey of European firms. Financial Management, 33(4), 103–132.Google Scholar
  5. Bevan, A., & Danbolt, J. (2002). Capital structure and its determinants in the UK—a decompositional analysis. Applied Financial Economics, 12(3), 159–170.Google Scholar
  6. Bhaduri, S. N. (2002). Determinants of capital structure choice: A study of the Indian corporate sector. Applied Financial Economics, 12(9), 655–665.Google Scholar
  7. Bokpin, G. (2009). Macroeconomic development and capital structure decisions of firms—Evidence from emerging market economies. Studies in Economics and Finance, 26(2), 129–142.Google Scholar
  8. Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). Capital structures in developing countries. The Journal of Finance, 56(1), 87–130.Google Scholar
  9. Bradley, M., Jarrell, G. A., & Kim, E. H. (1984). On the existence of an optimal capital structure. The Journal of Finance, 39(3), 857–878.Google Scholar
  10. Chakraborty, I. (2010). Capital structure in an emerging stock market-case of India. Research in International Business and Finance, 24(3), 295–314.Google Scholar
  11. Chen, J. S., Chen, M. C., Liao, W. J., & Chen, T. H. (2009). Influence of capital structure and operational risk on profitability of life insurance industry in Taiwan. Journal of Modelling in Management, 4(1), 7–18.Google Scholar
  12. Cortez, M. A., & Susanto, S. (2012). The determinants of corporate capital structure: Evidence from Japanese manufacturing companies. Journal of International Business Research, 11(3), 122–134.Google Scholar
  13. Deesomsak, R., Paudyal, K., & Pescetto, G. (2004). The determinants of capital structure: Evidence from the Asia Pacific region. Journal of Multinational Financial Management, 14(4–5), 387–405.Google Scholar
  14. Eldomiaty, T., & Azim, M. H. (2008). The dynamics of capital structure and heterogeneous systematic risk classes in Egypt. International Journal of Emerging Markets, 3(1), 7–37.Google Scholar
  15. Eriotis, N., Vasiliou, D., & Ventoura-Neokosmidi, Z. (2007). How firm characteristics affect capital structure: An empirical study. Managerial Finance, 33(5), 321–331.Google Scholar
  16. Fama, E. F., & French, K. R. (2002). Testing trade-off and pecking order predictions about dividend and debt. Review of Financial Studies, 15(1), 1–33.Google Scholar
  17. Frank, M. Z., & Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal of Financial Economics, 67, 217–248.Google Scholar
  18. Frank, M. Z., & Goyal, V. K. (2009). Capital structure decisions: Which factors are reliably important? Financial Management, 38(1), 1–37.Google Scholar
  19. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.Google Scholar
  20. Kariuki, S. N., & Kamau, C. G. (2014). Determinants of corporate capital structure among private manufacturing firms in Kenya: A survey of food and beverage manufacturing firms. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(3), 66–79.Google Scholar
  21. Kaur, R., & Rao, N. K. (2009). Determinants of capital structure: Experience of Indian cotton textile industry. The XIMB Journal of Management, 6(2), 97–112.Google Scholar
  22. Khan, A. G. (2012). The relationship of capital structure decisions with firm performance: A study of the engineering sector of Pakistan. International Journal of Accounting and Financial Reporting, 2(1), 245–262.Google Scholar
  23. Kumar, S., Colombage, S., & Rao, P. (2017). Research on capital structure determinants: A review and future directions. International Journal of Managerial Finance, 13(2), 106–132.Google Scholar
  24. Li, L., & Islam, S. Z. (2019). Firm and industry specific determinants of capital structure: Evidence from the Australian market. International Review of Economics and Finance, 59, 425–437.Google Scholar
  25. Li, H., & Stathis, P. (2017). Determinants of capital structure in Australia: An analysis of important factors. Managerial Finance, 43(8), 881–897.Google Scholar
  26. Mazur, K. (2007). The determinants of capital structure choice: Evidence from Polish companies. International Advances in Economic Research, 13(4), 495–514.Google Scholar
  27. Memon, P. A., Rus, D. R. B. M., & Ghazali, D. Z. B. (2015). Dynamism of capital structure: Evidence from Pakistan. Journal of International Business and Economics, 3(1), 52–63.Google Scholar
  28. Michaelas, N., Chittenden, F., & Poutziouris, P. (1999). Financial policy and capital structure choice in UK SMEs: Empirical evidence from company panel Data. Small Business Economics, 12(2), 113–130.Google Scholar
  29. Modigliani, F., & Miller, M. H. (1963). Corporate income taxes and the cost of capital: A correction. American Economic Review, 53(3), 433–443.Google Scholar
  30. Moosa, I., Li, L., & Naughton, T. (2011). Robust and fragile firm-specific determinants of the capital structure of Chinese firms. Applied Financial Economics, 21(18), 1331–1343.Google Scholar
  31. Moradi, A., & Paulet, E. (2019). The firm-specific determinants of capital structure—An empirical analysis of firms before and during the Euro Crisis. Research in International Business and Finance, 47, 150–161.Google Scholar
  32. Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5, 147–175.Google Scholar
  33. Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574–592.Google Scholar
  34. Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221.Google Scholar
  35. Rajagopal, S. (2010). The portability of capital structure theory: Do traditional models fit in an emerging economy? Journal of Finance and Accountancy, 5, 1–17.Google Scholar
  36. Rajan, R., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. The Journal of Finance, 50(5), 1421–1460.Google Scholar
  37. Sheikh, N. A., & Wang, Z. (2011). Determinants of capital structure: An empirical study of firms in manufacturing industry of Pakistan. Managerial Finance, 37(2), 117–133.Google Scholar
  38. Sogorb-Mira, F. (2005). How SME uniqueness affects capital structure evidence from 1994–1998 Spanish data panel. Small Business Economics, 25(5), 447–457.Google Scholar
  39. Suto, M. (2003). Capital structure and investment behaviour of Malaysian firms in the 1990s: A study of corporate governance before the crisis. Corporate Governance, 11(1), 25–39.Google Scholar
  40. Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance, 43(1), 1–19.Google Scholar
  41. Upneja, A., & Dalbor, M. C. (2001), An examination of capital structure in restaurant industry. International Journal of Contemporary Hospitality Management, 13(2), 54–59.Google Scholar
  42. Viviani, J. L. (2008). Capital structure determinants: an empirical study of French companies in wine industry. International Journal of Wine Business Research, 20(2), 171–194.Google Scholar
  43. Vo, X. V. (2017). Determinants of capital structure in emerging markets: Evidence from Vietnam. Research in International Business and Finance, 40, 105–113.Google Scholar
  44. Zhang, Y. (2010). The product category effects on capital structure: Evidence from the SMEs of British manufacturing industry. International Journal of Business and Management, 5(8), 86–113.Google Scholar
  45. Zou, H., & Xiao, J. Z. (2006). The financing behavior of listed Chinese firms. The British Accounting Review, 38(3), 239–258.Google Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Eastern Mediterranean UniversityFamagustaTurkey

Personalised recommendations