Do financial crises impact capital structure? : evidence from PIIGS

• Main Author: Fotiadou, Athina
• Publication Date: 2019
• Format: Master thesis
• Language: eng
• Source: Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
• Download full: http://hdl.handle.net/10400.14/28782
• topic: Capital structure; Leverage; Financial crisis; Debt determinants; Estrutura de capital; Endividamento; Crise financeira; Determinantes de dívida

This dissertation aims to study the relationship between both the firm and macroeconomic related variables and the capital structure in Portugal, Ireland, Italy, Spain and Greece (from now on PIIGS) as well as whether this relationship was affected by the 2008 financial crisis and its subsequent economic recession. The sample considers publicly traded firms over the period 2005-2017 and the results are presented by analysing and comparing the sub-periods before the financial crisis (2005-2007) and during the financial crisis (2008-2017). The market leverage was used as a proxy of the capital structure and the determinants tangibility, profitability, size, risk, market to book, free cash flow, nondebt tax shields, GDP per capita growth and inflation were set as the independent variables. The empirical results suggest that the global financial crisis did influence the capital structure of the publicly traded firms in PIIGS. The consistent and significant factors are profitability, size, market to book and GDP per capita growth. Tangible assets in PIIGS appear to have a greater influence on leverage during the period 2008-2017 than in the pre-crisis period where they present no influence at all. Size and market to book seem to affect leverage in both sub-periods under analysis, while free cash flow and inflation rate appear not to impact leverage at all. Finally, comparing the confidence intervals of the coefficients, we can infer that the 2008 financial crisis had no impact on tangibility, size, risk, market to book, free cash flow, nondebt tax shields and inflation, but did influence profitability and GDP per capita growth.