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Keywords:

  • capital structure;
  • tax-exempt organisations;
  • agency cost theory;
  • pecking order theory;
  • tradeoff theory

Abstract:  This study looks into the determinants of capital structure in the absence of tax incentives. I find that attributes normally associated with debt use for taxable corporations are likewise correlated with debt use in the tax-exempt sector. These include the organisation's age, asset tangibility, governance structure, industry grouping, liquidity, profitability, and size. Tax-exempt sector-specific findings indicate that debt use is also related to the size of the organisation's endowment and the amount of voluntary income. This study also demonstrates the portability of the theory of capital structure by extending the findings in Smith (2010) beyond the United States.