Determinants of Capital Structure in Airline Industry: An Empirical Study on Major Airlines in Africa
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Date
2019-02
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Addis Ababa University
Abstract
Airline Industry is very dynamic, competitive, highly capital intensive and critical for
sustainability. This study examines internal factors affecting the capital structure of five
major airlines in Africa. It also explores the applicable capital structure theories used in
determining capital structure using sixteen-year data from year 2002-2017.The study
used quantitative method research approach by using secondary data from audited
financial statements and other officially published documents. To deliver the most
reliable factors fixed effect model was applied. The findings of the study show that
profitability, liquidity, growth opportunity have statistically significant and negative
relationship with leverage, firm size has a significant and positive relationship with
leverage. Lease financing, Collateral value of asset and non-debt tax shield also have
negative relationship with leverage but the result was insignificant. Finally, it is
recommended African airlines to focus internal factors affecting the capital structure and
to focus internal financing sources before demanding external financing sources,
furthermore it recommended to use the most applicable peaking order theory as a guide
line when determining the capital structure in order to maintain sustainability, add value
and develop in the industry by avoiding in liquidity and bankruptcy problems.
Description
A thesis submitted to the department of accounting and finance in partial fulfillment of the requirement for the degree of Master of Science in Accounting and Finance.
Keywords
Capital structure, Internal factors, Leverage, Major airlines