The Moderating Effect of Creditworthiness: Adding Realism to Capital Structure Theory
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2018-07-25
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en
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This thesis attempts to bring more realism to capital structure theory by incorporating the moderating effect of creditworthiness into the current body of literature. Three operationalizations of creditworthiness are taken into account, namely: debt capacity, probability of insolvency and collateral. These were tested in random effects models that tested predictions based on both pecking order theory and trade-off theory. Data was collected on 204 American firms in several different industries in a time period spanning from 2008 to 2017. The crisis was found to yield no effect on the outcomes of this model. The results of the statistical analysis are largely robust, despite not confirming of the hypotheses. There is some indication that creditworthiness moderates capital structure, however more research has to be done in order to make confident claims about the mechanisms behind this moderation. Despite the expectation that there would be no rivalry between trade-off theory and pecking order theory, this rivalry is found after analysis. Therefore more research on this topic is necessary in order to truly uncover the effect of creditworthiness on capital structure and add definitive realism to capital structure theory.
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Faculteit der Managementwetenschappen