Determinants of capital structure: UK panel data

ABSTRACT: The paper investigates capital structure determinants of 5 important non-financial firms listed in FTSE100. The firms are chosen from oil and gas and mining industry. The period chosen for the study is 22 years from 1990 to 2012. Firms are chosen according to capitalization in market. Theories in capital structure such as the trade-off theory, pecking order theory and agency theory are described in order to find the best possible formulation to predict the choice of capital structure in firms. This study has chosen panel data to perform regression analysis with fixed effects estimation model. The variables chosen for this study are total debt ratio, profitability, growth, non debt tax shield, liquidity, tangibility and size. The results have shown that the findings in this study are according to previous studies. The empirical results show that liquidity, profitability and size are the variables which can cause changes in total debt ratio of firms. It is concluded that the further directions for future studies could be choosing more firms take into consideration the other theories of capital structure. This study has used total debt ratio, while long term debt ratio and short term debt ratio could also be useful to analyze firms and obtain more detailed results. Key Words: Capital Structure, Determinants of Capital Structure, Capital structure in FTSE, capital structure in oil and gas industry …………………………………………………………………………………………………………………………………………………………………………………………………………