DETERMINANTS OF THE CAPITAL STRUCTURE OF EUROPEAN FIRMS: THE MODERATING ROLE OF EFSF/ESM FINANCIAL ASSISTANCE PROGRAMS

Evidence from Listed European firms

  • Georgios Chatzinas Department of Accounting and Finance University of Macedonia, Thessaloniki, Greece
  • Symeon Papadopoulos Department of Accounting and Finance University of Macedonia, Thessaloniki, Greece

Abstract

The present study has investigated the moderating effect of the European Financial Stability Facility (EFSF) / European Stability Mechanism (ESM) support to the firms’ indebtness. Using dynamic panel data, three models were estimated and aimed at the determination of the way that EFSF/ESM financial assistance programs could influence the impact of five firm-specific characteristics, namely growth, profitability, size, tangibility and non-debt tax shield on the capital structure of European firms. Data from 2,086 firms for the period 2003 – 2016 were used, and two dummy variables; one for the EFSF/ESM support period and one for any kind of economic crisis period were formed. The results indicated that pecking order prevailed over trade-off theory. Economic crises did not affect severely the firm-characteristics’ effects, but the EFSF/ESM programs influence appeared in three cases. During the period of EFSF/ESM assistance, profitability’s negative effect on long-term debt ratio disappeared and on total debt ratio strengthened, growth’s positive impact on total debt ratio diminished and non-debt tax shield acquired positive influence on total debt ratio. These changes might be explained by the increased levels of tax rates and decreased levels of uncertainty that the EFSF/ ESM programs caused, as well as by the reluctance of lenders to provide new funds.


JEL Classification: G32, G38.

Author Biography

Symeon Papadopoulos, Department of Accounting and Finance University of Macedonia, Thessaloniki, Greece

Assistant Professor in the Accounting and Finance Department of University of Macedonia, Thessaloniki, Greece. 

Published
2021-12-02
How to Cite
CHATZINAS, Georgios; PAPADOPOULOS, Symeon. DETERMINANTS OF THE CAPITAL STRUCTURE OF EUROPEAN FIRMS: THE MODERATING ROLE OF EFSF/ESM FINANCIAL ASSISTANCE PROGRAMS. International Journal of Banking and Finance, [S.l.], v. 17, n. 2, p. 81-108, dec. 2021. ISSN 2590-423X. Available at: <http://e-journal.uum.edu.my/index.php/ijbf/article/view/ijbf2022.17.1.4>. Date accessed: 19 jan. 2022. doi: https://doi.org/10.32890/ijbf2022.17.1.4.