Title

The capital structure choice: Evidence of debt maturity substitution by GCC firms

RIS ID

132938

Publication Details

Obay, L. A. 2018, 'The capital structure choice: Evidence of debt maturity substitution by GCC firms', Asian Economic and Financial Review, vol. 8, no. 11, pp. 1298-1312.

Abstract

The objective of this study is to investigate the determinants of the capital structure decision in the face of restricted access to external financing. Based on a sample of 150 listed firms over the period 2000-2009, a two-stage least squares regression is used to test the determinants of capital structure, while controlling for firm-specific and country-specific factors. The results show that size, profitability, tax-shield and collateral have a significant impact on leverage. A country effect is also observed. Firms operating in the United Arab Emirates (UAE) exhibit a significantly higher level of leverage when compared to their peers in the neighboring countries. The results further document a novel finding that highlights the practice of debt-maturity substitution to circumvent the existence of external financing constraints faced by firms operating in the Gulf Cooperation Council (GCC) region.

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