Chatzinas, Georgios and Papadopoulos, Symeon (2022) Determinants of The Capital Structure of European Firms: The Moderating Role of EFSF/ESM Financial Assistance Programs. International Journal of Banking and Finance (IJBF), 17 (1). pp. 81-108. ISSN 2590-423X

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Abstract

The present study has investigated the moderating effect of the European Financial Stability Facility (EFSF) / European Stability Mechanism (ESM) support to the firms’ indebtness. Using dynamic panel data, three models were estimated and aimed at the determination of the way that EFSF/ESM financial assistance programs could influence the impact of five firm-specific characteristics, namely growth, profitability, size, tangibility and non-debt tax shield on the capital structure of European firms. Data from 2,086 firms for the period 2003 – 2016 were used, and two dummy variables; one for the EFSF/ESM support period and one for any kind of economic crisis period were formed. The results indicated that pecking order prevailed over trade-off theory. Economic crises did not affect severely the firm-characteristics’ effects, but the EFSF/ESM programs influence appeared in three cases. During the period of EFSF/ESM assistance, profitability’s negative effect on long-term debt ratio disappeared and on total debt ratio strengthened, growth’s positive impact on total debt ratio diminished and non-debt tax shield acquired positive influence on total debt ratio. These changes might be explained by the increased levels of tax rates and decreased levels of uncertainty that the EFSF/ ESM programs caused, as well as by the reluctance of lenders to provide new funds.

Item Type:	Article
Uncontrolled Keywords:	Capital Structure, trade-Off, pecking order, EFSF/ESM financial programs, Eurozone
Subjects:	H Social Sciences > HG Finance
Divisions:	School of Economics, Finance & Banking
Depositing User:	Mrs Nurin Jazlina Hamid
Date Deposited:	05 Mar 2023 08:33
Last Modified:	05 Mar 2023 08:33
URI:	https://repo.uum.edu.my/id/eprint/29213

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