The effect of economic determinants on capital structure

This study is conducted to examine how macroeconomic factors affect capital structure of nonfinancial and non-insurance joint stock companies in Saudi Arabia. The research applied three multiple regression models to test the relation between the measures of capital structure (LEV, LTD and STD) and macroeconomic determination (INF, IR. GDPG and unemployment rate). We used to analyze data which is a combination of two sources: financial statements of 15 listed joint stock companies on the main stock market (Tadawul), and World Bank database in the period of 2009-2016. The findings show there is a relationship between the inflation and leverage as well as long-term debt for the companies which calls for them to finance their investments more. The results indicate an inverse relationship between the GDPG and the leverage, short-term debt, and long-term debt. Consequently, corporations in the Saudi Exchange market should keep track of the inflation rate and ensure that their leverage, short-term debt and long-term debt move against inflation. Finally, it is noticeable that capital structure decisions depend on capital structure of the previous year.

Autorentext

MSC de l'Université de Dublin dans le domaine de la finance, actuellement gestionnaire de patrimoine et d'investissement chez Audi Capital, en Arabie Saoudite. Plus de quinze ans d'expérience dans l'investissement et la banque.