The determinants of capital structure of Palestine‐listed companies

Abstract

Purpose The purpose of this paper is to examine the relationship between capital structure and debt lifetime among listed companies in Palestine stock market. Design/methodology/approach This study investigates firms that have been listed on the Palestine securities exchange (PSE) over a five‐year period (2000‐2004). In total, 28 companies were listed in PSE since 1999. Only 15 firms working in different economic sectors qualified to be included in the study sample according to the availability and continuity of published financial statements during the period of 2000‐2004. Variables used for the analysis include profitability, leverage ratios (total debt (TD), short‐term debt (STD) and long‐term debt (LTD)), liquidity (LQ), age, asset structure, and firm size and sales growth are also included as control variables. The panel character of the data allows for the use of panel data methodology. Panel data involves the pooling of observations on a cross‐section of units over several times. Findings The study has shown that the service companies have the highest TD ratio (53.69 percent), followed by industrial companies (50.86 percent), trade companies (34.11 percent) and agriculture companies (24.02 percent). The one way analysis of variance (ANOVA) shows no significant difference in the use of debt, neither total, LTD or STD among companies in the four sectors. Adding to that, ANOVA indicates insignificant differences among the companies in the sample with respect growth opportunities, size, age, tangibility (TAN), and LQ. The correlation analysis has shown that TD is positively and significantly related to TAN, on the country, no significant relationship between the long debt and STD on the one hand and age, growth, LQ, TAN, and size on the other hand. Originality/value This paper is the first that employs a new database containing the market and accounting data (from 2000 to 2004). This study will contribute in examining the relationship between capital structure and debt lifetime among listed companies in the Palestine stock market.

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