Title: Rethinking the antecedents of capital structure of Johannesburg Securities Exchange listed firms

Authors: Tesfaye T. Lemma; Minga Negash

Addresses: School of Accountancy, University of Limpopo, Private Bag X1106, Sovenga 0727, South Africa. ' Department of Accounting, Metropolitan College of Denver, 1201 5th Street, Denver, CO 80204-2005, USA; School of Accountancy, University of the Witwatersrand, Private Bag 3, Wits 2050, Johannesburg, South Africa

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.

Keywords: capital structure; antecedents; South Africa; exploratory factor analysis.

DOI: 10.1504/AAJFA.2011.043867

Afro-Asian Journal of Finance and Accounting, 2011 Vol.2 No.4, pp.299 - 332

Published online: 18 Mar 2013 *

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