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Capital Structure Analysis of Exporting and Non-exporting Mauritian Firms: A Pre- and Post-crisis Investigation

  • Indranarain Ramlall
Chapter

Abstract

This chapter probes into the impact of the crisis on the capital structure of Mauritian exporting and non-exporting companies by augmenting the determinants of capital structure through the use of strategic variables like tax, sales and equity. Two metrics of leverage (short-term leverage and long-term leverage) are used and two major periods of time (pre- and post-crisis). The weak impact of the age variable is noted while sales induce the use of short-term leverage but deter the use of long-term leverage. Evidence is found of Mauritian firms contracting longer-term debt during the crisis period to fund their purchases of fixed assets. Size effects reveal that the larger firms in Mauritius tend to make more use of short-term debt rather than long-term debt. Liquidity acts as a major determinant in contracting short-term debt while asset tangibility acts as the major driver in taking on long-term debt. Profitability variable is consistent with static trade-off theory based on a positive relationship between profitability and long-term debt. Policy-wise, is the analysis identifies a need to democratize equity financing to smaller firms to ensure that bankruptcies are well contained during stressful conditions. Impotency of tax under short-term debt signifies no need for fiscal motives to instil a relieving operational manoeuvre to Mauritian companies.

Keywords

Information Asymmetry Capital Structure Equity Financing Free Cash Flow Financial Leverage 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© The Author(s) 2017

Authors and Affiliations

  • Indranarain Ramlall
    • 1
  1. 1.University of MauritiusMokaMauritius

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