Determinants of Capital Structure in Singapore’s Manufacturing Industry

Abstract

This study investigates the relationship between fim value and capital structure, and its determinants in Singapore's manuvacturing sector from 2001-2011, and explores wether these deerminants remain the same across different industry segments. Our resulr shows a strong correlation between debt ratio and firm value, and shows that most Singapore fims are also moving towards reducing debt in capital structure, which mat be an indication that firm are trying to optimise theri debt position to maximise the fim value, iben the nature of Singpaore's economy. A fixed effects panel estimation model reveals that key determinatns are tangibility (+ve), size (+ve), profitability (-ve) and non-debt tax shield (-ve), which are similar to those identified in earlier studies in the context of other economics. Tangibility and non-devt tax shield are common determinants across the industrial sector and consumer goods sector. The empirical results are mostly explained by trade-off theory.