Impact of Financial Institutions Development on Capital Structure of Listed Firms in Asean Developing Countries

Abstract

AbstractUsing Bayesian approach, this research aims to analyze the impact of financial institutions development on corporate capital structure in 5 developing countries in ASEAN region from 2010 to 2019. We find that financial institutions development and profitability have a negative impact on firms ‘capital structure (including total debt, long-term debt and short-term debt), while inflation positively affects capital structure. National institutional quality and GDP per capita growth rate can have a bidirectional effect on capital structure. Firm size and asset properties have a positive impact on total debt and long-term debt, but negative impact on short-term debt. Meanwhile, TOBINQ has a positive impact on long-term debt, but bidirectional effect on total debt and short-term debt. Our research findings on the capital structure of firms in the five ASEAN developing countries supports both the trade-off theory and the pecking order theory.KeywordsCapital structureASEANFinancial institutions developmentJEL Classification CodeC12C13E44F15