n Management Dynamics : Journal of the Southern African Institute for Management Scientists - The combined effect of changes in the South African business environment on capital structure

Volume 20, Issue 1
  • ISSN : 1019-567X



The management of a firm's capital structure is an important aspect of the financial manager's responsibilities. Various factors in the business environment can have an influence on a firm's financing decisions. This study considered the impact of various economic and firm-specific factors on the finance decisions of firms. A census of Johannesburg Securities Exchange (JSE Ltd) listed industrial firms was considered over the period 1989 to 2008. Profound changes occurred in the South African business environment during the study period, thus providing the ideal capital structure research environment in a developing country. A time-series cross-section regression procedure with one-period lags was used. The results of this study indicate that the effects of economic changes on capital structure are often indirect and only seen after a period of time. It was also noted that the trade-off and pecking-order capital structure models are not mutually exclusive. Over time, management can deviate from their selected capital structure model to incorporate the benefits of a different model.

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