Financial constraint, Firm Specific Factors and Corporate Capital Structure Decision: An Empirical Study of GCC stock markets

Abstract

We examine the relationship between financial constraint, firm specific factors and capital structure decision in GCC countries by using a panel model. In this study, the non-financial listed were selected over the time period between 2008-2015. The results indicate that the leverage has a significant association with size, profitability, financial constrain, and tangibility. Leverage has a positive association with the size and the tangibility of the firms whereas financial constraints and profitability negatively related to leverage. It is a good decision to use an optimal capital structure to maximize the returns of the firm and wealth of shareholders, although this optimal combination of debt and equity should be manageable in terms of risk.