Capital Structures in Developing Countries


  • Laurence Booth,

  • Varouj Aivazian,

  • Asli Demirguc-Kunt,

  • Vojislav Maksimovic

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    • Booth holds the Newcourt Chair in Structured Finance in the Rotman School of Management at the University of Toronto. Aivazian is Professor in the Department of Economics and Rotman School of Management at the University of Toronto. Demirguc-Kunt is a Principal Economist with the World Bank, and Maksimovic is Professor in the School of Business at the University of Maryland. This paper is the product of two independent papers submitted to the journal at approximately the same time, one by Booth and Aivazian and the other by Demirguc Kunt and Maksimovic. Our thanks to former journal editor René Stulz and an anonymous referee for comments that substantially improved on both the original papers. We would like to thank the International Finance Corporation for providing the data necessary for this study.


This study uses a new data set to assess whether capital structure theory is portable across countries with different institutional structures. We analyze capital structure choices of firms in 10 developing countries, and provide evidence that these decisions are affected by the same variables as in developed countries. However, there are persistent differences across countries, indicating that specific country factors are at work. Our findings suggest that although some of the insights from modern finance theory are portable across countries, much remains to be done to understand the impact of different institutional features on capital structure choices.