Capital Structure Determinants for Tax-Exempt Organisations: Evidence from the UK


  • Geoffrey Peter Smith

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    • The author is from the Department of Finance, W.P. Carey School of Business, Arizona State University, USA. He thanks Murillo Campello, Dirk Hackbarth, and two anonymous referees for their helpful comments and suggestions. He thanks Edward James, Diarra Smith and Adanne Wadibia-Anyanwu from GuideStar Data Services for their help with the data. He also thanks the developers from the R Project for Statistical Computing for the computer software used in the data analysis.

Geoffrey Peter Smith, Arizona State University West Campus, PO Box 37100, Phoenix, AZ 85069-7100, USA.


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.