Capital Structure in the Chilean Corporate Sector: Revisiting the Stylized Facts

Abstract

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Purpose: This paper analyzes the traditional drivers of the capital structure in addition to others particularities of the Chilean corporate sector. Design/methodology/approach: Using panel data methodology, this study examines the potential drivers of the capital structure in a sample of 157 Chilean firms. To do that, this study also includes variables not commonly used in the literature (e.g. ownership concentration, business groups affiliation, and dividends), which represent distinctive elements of the Chilean corporate sector. Findings: The results show a positive effect of firm size and ownership concentration on the leverage of firms, as well as a negative effect from the pay-out policy, growth opportunities, non-debt tax shields, and profitability on the leverage. Some expected relationships from the Anglo-Saxon context are also curiously observed in Chile. Nevertheless, there are some relations that are not in line with the current literature such as the negative relationship between asset tangibility and leverage. Finally, a firm´s affiliation to certain economic groups allows it to take advantage of internal capital markets, thus increasing leverage. This suggests that some of the insights from the current theoretical frameworks are not portable across countries, and consequently, much remains to be done to understand the impact of different institutional features on capital structure choices. Originality/value: Emerging markets provide a challenge to existing models that need to be reformulated to accommodate their specific characteristics. This study contributes to this by taking into consideration the particularities of an emerging Latin American Economy. Paper type: Research paper.