In this chapter, the authors choose nine variables to test the determinants of capital structure: asset size, growth of assets, non-debt tax shields, fixed asset ratio, profit margin, research and development expenditure, advertising expenditure, selling expenses, and the coefficient of variation of cash flows as business risk. They also run the tests with and without business risk to see the change of signs and robustness of the test results. Further, the authors use the dummy variables for industry classification to see whether industry characteristics have any impact on the capital structure. To analyze the determinants of capital structure, they use the ordinary least square equations, with the long-term debt ratio as the dependent variable, and asset size, growth of assets, non-debt tax shields, fixed assets to total assets ratio, net profit margin, research and development expenditure, advertising expenditure, and selling expenses as independent variables.
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