Determinants of the capital structure of firms: Differences between bank‐based financial systems and market‐based financial systems

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Motivated by the contradicting findings and lack of unanimity in the literature, combined with limited and relatively dated evidence on capital structure determinants differences between bank-based and market-based financial systems, this thesis further investigates whether the effects of the capital structure determinants on leverage differ between bank-based and market-based financial systems. Using panel data with firms from Germany, The Netherlands, France (bank-based), the US, and the UK (market-based) during the period 2014-2020, this thesis extents the literature and develops our understanding on this topic by examining these capital structure determinants differences in a post 2008 financial crisis period. Based on the literature, a different effect on leverage between bank-based and market-based financial systems could be hypothesized for the determinants asset tangibility, profitability, growth opportunities, and investment in fixed assets. Interestingly, none of these hypotheses could be accepted and contradicting evidence is found for these determinants compared to earlier studies. The results of the research, however, unexpectedly find evidence that the effects of the determinants firm size, firm age, innovation, and non-debt tax shields on leverage of firms do differ between bank-based and market-based financial systems, although no such different effect could be hypothesized for these determinants based on the literature.
Faculteit der Managementwetenschappen