Capital Structure Policies in Europe: Survey Evidence

Abstract

In this paper we present the results of an international survey among 313 CFOs on capitalstructure choice. We document several interesting insights on how theoretical concepts arebeing applied by professionals in the U.K., the Netherlands, Germany, and France and wedirectly compare our results with previous findings from the U.S. Our results emphasize thepresence of pecking-order behavior. At the same time this behavior is not driven by asymmetricinformation considerations. The static trade-off theory is confirmed by the importance of a targetdebt ratio in general, but also specifically by tax effects and bankruptcy costs. Overall, we findremarkably low disparities across countries, despite the presence of significant institutionaldifferences. We find that private firms differ in many respects from publicly listed firms, e.g. listedfirms use their stock price for the timing of new issues. Finally, we do not find substantialevidence that agency problems are important in capital structure choice.

Keywords: international economics, financial economics, capital structure, debt maturity, equity issues

JEL Classification: M, G3, G32, O32, L15