Determinants of Capital Structure: Panel Data Evidence from Dar es Salaam Stock Exchange

Abstract

This study jointly investigated the relationship of a set of capital structure determinants; namely asset tangibility, size of firm, profitability of firm, growth opportunities, going concern, risk of bankruptcy and non-debt tax shields. It employed both static and dynamic regression techniques to account for static and dynamic effects on total gearing of firms listed on the Dar es Salaam stock exchange. The results indicated that firms have high debt adjustment costs; as a result, adjustment speeds towards optimal capital structure were low. It confirmed that most capital structure determinants were statistically significant. Their role accounted for about 0.798-0.928 of variations in the capital structure variability. Particularly, size of firm, profitability of firm and going concern, were negatively related to capital structure gearing while growth opportunities and non-debt tax shields were positively related to capital structure gearing.