Determinants of Capital Structure Evidence from Saudi Arabia

Abstract

This study aims toinvestigate the most important determinants of capital structure in non-financial Saudi Arabian firms listed in Saudi Stock Exchange (TADAWUL) from 2010-2021, using a fixed effect with robust standard regression. Theories of capital structure have different views and conclusions as well as the empirical works. Thus, determining the factors affecting the capital structure in a different context like Saudi Arabia that has a unique feature such as the absence of corporate tax, undeveloped and illiquid bond market, will add to the existing literature. The study finds a positive relationship between each size, asset tangibility, and market- to book with firm leverage On the other hand, there is a negative relationship is found between profitability and sales growth. Some of the findings are consistent with the trade-off theory such as firm size while some of the findings support the picking order theory. Empirical findings should help corporate managers understand the nature of the market and make optimal capital structure decisions.