Rethinking the antecedents of capital structure of Johannesburg Securities Exchange listed firms Online publication date: Mon, 18-Mar-2013
by Tesfaye T. Lemma; Minga Negash
Afro-Asian J. of Finance and Accounting (AAJFA), Vol. 2, No. 4, 2011
Abstract: This study examines antecedents of capital structure of firms in the Johannesburg Securities Exchange. The difficulties in measuring attributes of interest are addressed on two fronts: conceptual and methodological. A broader conceptual framework is developed by introducing several new proxies for firm-specific and industry attributes. We employ a range of measures of leverage that allow us to examine definitional sensitivity of the explanatory power of capital structure theories. A two-step procedure consisting of exploratory factor analysis and multiple regression is employed. Analysis of data obtained from a sample of 152 firms, across a period of eight years (i.e., 2002 to 2008) indicates that the explanatory power of antecedents of capital structure of JSE listed firms is sensitive to how leverage is defined. We also find that capital structure is negatively influenced by such factors as profitability, liquidity, intangible-unique-growth opportunities, and business risk; it is positively affected by industry factors.
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