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CAPITAL STRUCTURE DETERMINANTS: AN EMPIRICAL RESEARCH OF RUSSIAN FIRMS
Abstract
This paper provides a brief review of literature and evidence on the relationship between capital structure and ownership structure. The study also provides empirical support to the determinants which affects the firm capital structure. This paperwork tests proposed hypotheses of relationship between leverage ratio and traditional determinants of financial leverage of Russian firms, operating in the petrochemical complex of the Republic of Tatarstan, using dynamic panel data methodology. To analyze the impact of firm specific characteristics on the corporate capital structure decisions an econometric model of linear multiple regression is constructed. Based on the data availability, the following specific firm borrowing determinants are analyzed in this study: size, profitability, growth opportunities in plant, property and equipment, growth opportunities in total assets, non-debt tax shields and tangibility. The analysis is based on panel data estimations on a sample of 8 firms, observed during six years (2010-2015). It has been concluded that factors that variable of size reveal a positive relationship with the leverage ratio. However, profitability, possibility of growth of the plant, property and equipment, non-debt tax shield reveal inverse relation with debt to equity ratio. The explanatory variable which has the highest impact on the capital structure choices is a non-debt tax shield. The empirical evidences provide that the growth opportunities in total assets and tangibility aren't a significant determinants of financial leverage of the firms. Due to data limitations, it was not possible decompose determinants of corporate borrowing into its elements, but the results suggest that future analysis of capital structure decisions should be based on a more detailed level.
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