The Determinants of Capital Structure in Listed Egyptian Corporations

This paper aims at empirically investigating the financing decisions of listed Egyptian corporations and the key factors that affect their choice of capital structure using firm-level panel data. The methodology utilizes a correlation test to separate a set of significant factors influencing the capital structure from a comprehensive list of firm-level variables. Then, to test the relationship between the capital structure and its potential determinants a Feasible GLS regression is conducted. The results indicate that the overall significant determinants are mainly: firm size, profitability, liquidity, and business risk. Nevertheless, the key factors influencing the firms’ decision between equity and debt tend to differ across the different industries in Egypt. In general, however, evidence suggests that firms in Egypt tend to follow a certain hierarchy of finance that is consistent with the Modified Pecking Order theory of capital structure.