Determinants of Capital Structure: Empirical Study of the Industrial Companies in North Macedonia

Abstract

This study explores the determinants of capital structure within industrial firms in North Macedonia, focusing on a decade-long panel of companies listed on the Macedonian Stock Exchange from 2012 to 2022. Using panel regression analysis, the research examines the impact of key factors—firm size, profitability, asset tangibility, growth, risk, and taxation—on the leverage decisions of these firms. The results reveal that firm size and asset tangibility are positively associated with leverage, indicating these companies’ reliance on debt, especially when supported by substantial physical assets. In contrast, profitability demonstrates a negative relationship with leverage, consistent with the Pecking Order Theory, suggesting that profitable firms in this emerging market prefer internal financing. Growth, measured through sales, shows a positive correlation with leverage, though the impact varies with growth metrics. Overall, this study highlights the unique capital structure dynamics in a transitioning economy and provides valuable insights for financial managers operating in similar markets.