Determinants of Capital Structure Decisions: An Empirical Study from Developing Country

The aim of this study is to determine the factors affecting the capital structure decisions in Jordanian listed firms. To accomplish this, the data of 127 companies listed on the Jordanian stock exchange were collected from industrial and service sectors during 2011-2014. Financial sector was omitted from the study due to financing certain rules apply. To explain factors affecting the capital structure decision, capital structure was used as the dependant variable and the independentvariables in this study include firm size, profitability, growth, tangibility, risk and liquidity. The data was analysed using regression analysis to examine the relationship between capital structure and the dependant variables. The empirical results reveal that firm size and risk are primary determinants of capital structure in Jordanian listed companies while the relationship with profitability was negatively significant. The remainder of the independent variables of growth, tangibility and liquidity revealed insignificant relationship with capital structure. The results will be of great benefitto corporate managers in making optimal capital structure decisions. The results proved consistency with capital structure theories and other research results.