Institutions and Corporate Capital Structure in the MENA Region

This paper provides novel evidence on firm- and country-level determinants of firm capital structure decisions in the MENA region. Using a sample of 444 listed firms from ten countries, over the 2003-2011 period, we find that MENA firms have target leverage ratios toward which they adjust over time. Yet, the speed of adjustment varies from one country to another. Our findings also suggest that some firm-level factors are associated with leverage consistent with the trade-off and pecking order theories of capital structure. We further find robust evidence that better institutional quality leads firms to use more debt