Capital Structure Determinants: New Evidence from French Panel Data

Abstract

This paper examines the theoretical and empirical determinants of firms’ capital structure choice. The emphasis
here is placed on the role of capital market imperfections through the tradeoff, pecking order and market timing
theories to explain firms’ leverage. Our analysis is conducted on a sample of 244 French listed companies over the
period 1997-2007.The empirical results point to the existence of complementarity between the tradeoff hypothesis
and the financing deficit variable, while no meaningful effect was detected for market conditions on debt ratio.
Market timing in its simple form or extended one, is not confirmed either. The relevance of lagged leverage ratio in
all tests confirms the existence of a process of dynamic adjustment to a target level.