Analyzing the Impact of Firm’s Specific Factors and Macroeconomic Factors on Capital Structure: A Case of Small Non-Listed Firms in Albania.

Abstract

This paper attempts to explore the impact of firm specific factors and macroeconomic factors on capital structure decision for a sample of 69 non- listed firms, which operate in Albania, over the period 2008-2011.In this paper is used total debt to total assets (TDTA) as dependent variable and eight independent variables: tangibility (TANG), liquidity (LIQ), profitability (ROA) , size (SIZE),business risk(RISK) , non-debt tax shields (NDTSH),GDP growth rate (GDP) and prime lending rate (INT). The investigation uses cross-sectional time series data which are collected from the Balance Sheet Annual Reports, the official document delivered to the State Tax Office. This study found that tangibility (fixed assets to total assets), profitability (earnings after taxes to total assets), size (natural logarithm of total assets), risk (standard deviation of EBIT to average value of EBIT) and NDTSH (amortization to total assets), GDP growth rate and interest rate have a significant impact on leverage. Also it is found that liquidity (current assets to current liabilities) has a negative but not a significant relation with leverage.

Keywords: Albania, Capital structure, Firm’s specific factors, Macroeconomics factors