Determinants of Capital Structure (An Empirical Evidence, US)

Rashid Naim Nasimi

Volume 16 Issue 4

Global Journal of Management and Business

This paper develops a study on identifying the most significant determinants of capital structure of 15 firms listed on the S&P 500 index, New York Stock Exchange using panel data over 5 years period from 2010 to 2014. Multiple regression analysis has been employed for testing the impact of six independent variables on three dependent variables. The results show that among all the six independent variables that represent profitability, size, growth, tangibility, cost of financial distress and non-debt tax shield effects; tangibility has a significant impact on the three of dependent variables which are total debt ratio, long term debt ratio and short term debt ratio. Thus, profitability, size, growth, tangibility, cost of financial distress and non-debt tax shield effects are the determinants of capital structure for the IT firms in the United States. The study concludes that debt is preferred in the capital structure of firms in the IT sector of the United States.