Does Capital Structure and Speed of Adjustment Vary Across Developing Countries in Africa?

The purpose of this study is to investigate the factors that determine capital structure and the speed at which firms adjust their leverage level. In particular, we assess whether the determinants and the speed of adjustment vary according to the level of the country's industrialization. The study adopts a quantitative approach using balanced panel data of manufacturing firms in selected African countries. The study reveals that pecking order, the trade-off and the signalling theories work in complementary way. Further, profitability, liquidity, earning volatility and asset structure were found to be negatively related in some countries while in other countries, liquidity and profitability were positively related to leverage. We found that firms in Egypt adjust their leverage at a speed of 77% per year while firms in South Africa, Nigeria and Kenya adjust at 42%; 49% and 12% respectively. The study also reveals that the growth of the economy plays a significant role in adjusting the leverage level