Does capital market development influence capital structure choices of firms?

Selatitsana, Phatsisi
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This study investigated on the influence of capital market development on capital structure choices of selected non-financial firms in emerging as well as in frontier markets from period 2010 to 2017. To measure capital market development, stock market turnover ratio and ratio of domestic credit to private sector by commercial banks to GDP were used. The study finds that beside firm specific factors and other country-level factors which are used to explain financing choices of firms, capital market development as well affects the financing decisions of listed firms. This study generally, discovers that the development of equity and debt markets are both significant in increasing access to funding by firms and therefore, inform the choice of debt ratios employed by firms both in emerging and frontier markets. The findings of this thesis found that emerging markets enterprises use equity markets as a substitute for debt funding, but the preferable source of finance for firms is long-term debt with the highest positive coefficient. Conversely, in frontier markets, firms are using stock market as a complementary to debt financing, but the most preferred source of financing is short-term debt having highest coefficient
A research report submitted to the Wits Business School, Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Masters of Management in Finance and Investments, 2021
Capital market, Capital market development, Non-financial firms, Stock market, Firm