The Determinants of Capital Structure in Ethiopian Small Scale Manufacturing Co- operatives
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Date
2011-09
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Addis Ababa University
Abstract
The purpose of the study is investigating the determinants of capital structure for
Small Scale Manufacturing Co-operatives (SSMCs) in Ethiopia. Hypotheses
utilizing trade-off, pecking order and agency theories are empirically examined
using a series of firm characteristics: size, tangibility, profitability, earning
volatility, growth and age. A structured record review was made to collect a
panel data, which include 13 SSMCs year observations of five years over the
period 1998 – 2002 E.C. The findings suggest that size, age, tangibility, and
growth variables are the most important determinants of capital structure of
SSMCs in Ethiopia. The findings also reveal that the dominant capital structure
theories (trade-off, pecking order, and agency theories) appear indeed to be valid
for Ethiopian SSMCs’ capital structure; in fact, trade-off theory best explains
Ethiopian SSMCs’ capital structure. All firm specific variables except earnings
volatility variable seem to have an effect on the level of leverage in Ethiopian
SSMCs.
Key words: Capital structure; Small Scale Manufacturing Co-operatives
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Keywords
Capital structure; small scale manufacturing Co-operatives