Three Industry Characteristics Affecting Capital Structure: Review of Literature

Abstract

This paper summarizes the literature that studies the impact of industry characteristics on capital structure, and focuses on three factors, namely, growth opportunities, tangibility and firm size. We find that most literature supports the following conclusions: growth opportunities are negatively correlated with leverage, tangible assets are positively correlated with leverage, and enterprise size is positively correlated with debt level. At the same time, we find some limitations in previous studies. For example, scholars generally use linear regression as research method, and focus more on developed countries rather than on developing countries. According to these current situations, we give several suggestions for future research directions.