Determinants of Capital Structure Decisions of Construction Companies in Addis Ababa, Ethiopia
No Thumbnail Available
Date
2012-04
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U
Abstract
The company's capital structure is influenced by a number of factors, and several studies
have been conducted to examine the factors that can affect the capital structure of
companies in various countries. However, no such study has been conducted in Ethiopia,
where majority of construction companies have no clear financing pattern. Thus, the
factors affecting their capital structure are not clear and therefore, this study was
conducted in order to fill this existing knowledge gap. In examining the determinants of
capital structure of those construction companies, quantitative research approach is
used. A panel data collected form 11 randomly selected construction companies,
covering the period from 2006 to 2010 was used. The findings from the panel random
effect estimation appear to support the pecking order theory of capital structure.
Specifically, the result reveals that the variables including growth opportunity,
tangibility, and non-debt tax shield positively affect the variations on the capital structure
of construction companies. Profitability of the companies, size, earning volatility,
liquidity and age, on the other hand, inversely affect their capital structure. Furthermore,
among the whole independent variables, which are tested in this study, growth
opportunity, tangibility of assets, liquidil1) and age of the company's are found as
significant variables that explains the variations of the capital structure of construction
companies.
Key words: Determinants of Capital structure, Pecking Order theory,
Trade of Theory, Ethiopian Construction Companies
Description
Keywords
Ethiopian Conshuction Companies, Pecking Order theory