Determinants of the level of indebtedness for Brazilian firms: A quantile regression approach

We investigate the determinants of the capital structure of Brazilian companies between 2000 and 2009. We use a quantile regression model and compare its results with the ones provided by conventional models (least squares and fixed effects). We show that the effects of the capital structure determinants change depending on the quantile. This can be explained by bankruptcy and agency costs associated to the amount of debt leverage of firms, relative to each quantile. Based on these results, we analyze the predicted effects of the two leading capital structure theories, namely pecking order and trade-off, conditioned on the determinant, type of debt and quantile analyzed. Our results for the size and profitability variables indicate that the pecking order theory is more suitable to the data as the quantile increases.