Leverage and Macroeconomic Determinants: Evidence from Ukraine

Viewed retrospectively since the work of Modigliani and Miller (M&M, 1958), the capital structure still remains a matter of study. The capital structure issue then is examined from different perspectives, and thus intertwining firms and macroeconomic determinants. Studies were focused to examine the relationship between leverage ratios and macroeconomic environment. Motivated from what was done earlier, we try to bring in this study evidence as well. Thus, totally 49 Ukrainian firms are selected and data are examined from 2012 to 2016. The paper is aimed at studying the process of leverage adjusting by examining five firm’s characteristics and three macroeconomic determinants. We found that leverage is influenced significantly from both, firm characteristics and macroeconomic determinants. The study provides evidence those firms with higher tax shield, tangibility, net trade credit, and profitability used more leverage than counterparties. Firm’s size and inflation are confirmed as insignificant determinants. On the other hand, GDP growth rate and default spread are confirmed to play a role on leverage policies.