The determinants of corporate capital structure: Japanese evidence

Abstract

This paper features a cross–sectional regression analysis of the determinants of the company debt to value ratios of a sample of 125 Japanese industrial and commercial companies for the period 1980–1983 inclusive. The regression equations include a set of dummy variables designed to capture industry effects, and a number of other variables acting as proxies for likely determinants of debt ratios suggested in the empirical literature; such as profitability, non–debt tax shields, risk, etc. The results are consistent with the existence of industry effects, and suggest that, paralleling recent American findings, profitability is the most significant determinant of Japanese company debt ratios.