DETERMINANTS OF CAPITAL STRUCTURE OF LISTED BRAZILIAN FIRMS

Abstract

Despite the great number of papers about capital structure, we don’t have a clear definition of how managers determine the composition of their firms’ financial sources (capital structure). Therefore, it is relevant to explore this subject, by examining the determinants that could explain the capital structure decisions by managers. This study aims to test which determinants proposed by the literature are significant for Brazilian listed firms. The data is obtained from the firms’ financial statements and from the stock market, employing panel data analysis, which represents a differential in relation to the former empirical studies in this subject in Brazil (with a few exceptions). The main results of this study reveal that some determinants (profitability, tangibility, and growth opportunities) are consistent with the theory, while others (risk, size, and control structure) are insignificant, in contrast to what is predicted by the theories of capital structure (Static-Tradeoff hypothesis, Informational Asymmetry hypothesis, and the Pecking Order).