The influence of Egyptian pound flotation on capital structure determinants for listed Egyptian companies

Abstract

In Egypt, an essential economic transformation program was started in prior years to enhance Egyptian economic progress and the liberalization of the Egyptian pound (EGP) exchange rate (International Monetary Fund [IMF], 2017). By the end of 2016, Egypt had an EGP flotation where significant changes took place in trading volumes, stock issuance, and interest rates (Central Bank of Egypt, 2018). One of the most vital decisions in any company is the capital structure decision. Therefore, this research strengthens the capital structure literature by investigating the influence of Egyptian pound flotation on capital structure determinants for the listed Egyptian companies during the period from 2014 to 2018, which is a research issue, not examined in Egypt before. A sample of 78 non-financial companies listed on the Egyptian Stock Exchange (ESX) over 5 years is used; the research examines the influence of a company’s profitability, tangibility, size, growth, liquidity, non-debt tax shields, and flotation on capital structure. Adopting panel data methodology, the findings indicate that the company’s profitability, tangibility, size, and liquidity are significant determinants of the capital structure of Egyptian companies whereas growth, non-debt tax shields, and flotation are insignificant. A weak influence of EGP flotation on determinants of capital structure and the variations before and after flotation is in the significance level of the determinants