Firm level determinants of capital structure in Algeria

Abstract

This study analyzes the capital structure determinants in a sample of 207 non-financial Algerian enterprises (2013-2017).The Tobit-panel random effects model gives the following results: the firm-level determinants at the 1% level are : the profitability, the tangibility, the debt-tax shield DTS and the non-debt tax shield NDTS . A profitable company can easily take on debt at a low interest rate. The tangible assets are used as a collateral. The Algerian enterprises take on debt in order to benefit from the debt-tax deductibility. The positive impact of the DTS variable confirms the positive impact of the profitability variable. The debt-tax deductibility is useful when a company is profitable. The NDTS is an alternative funding source for the enterprises. For the state-owned subsample, the debt ratio decreases when the firm size increases. The small state-owned enterprises have a low self-financing. These enterprises are financed by the debt. For the services field subsample, the liquidity is used as a collateral.