We analyze the importance of firm-specific and country-specific factors in the leverage choice of firms from 42 countries around the world. Our analysis yields two new results. First, we find that firm-specific determinants of leverage differ across countries, while prior studies implicitly assume equal impact of these determinants. Second, although we concur with the conventional direct impact of country-specific factors on the capital structure of firms, we show that there is an indirect impact because country-specific factors also influence the roles of firm-specific determinants of leverage.

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Keywords capital structure, country-specific factors, firm-specific factors, international evidence, leverage
JEL F30, International Finance: General (jel), G10, General Financial Markets: General (jel), G32, Financing Policy; Capital and Ownership Structure (jel)
Persistent URL dx.doi.org/10.1016/j.jbankfin.2007.12.034, hdl.handle.net/1765/13591
de Jong, A, Kabir, R, & Nguyen, T.T. (2008). Capital structure around the world: The roles of firm- and country-specific determinants. Journal of Banking & Finance, 32(9), 1954–1969. doi:10.1016/j.jbankfin.2007.12.034