Optimal Capital structure and financial stability

Firano, Zakaria and Filali adib, Fatine (2022): Optimal Capital structure and financial stability.

Abstract

This paper attempts to answer the fundamental question of the choice of capital structure. The financial structure in Morocco raises several questions about the behaviour of firms, especially in relation to the banking system and the financial market. We tried to determine the factors that explain the choice of financial structure. In addition to the traditional known factors, we were able to introduce the effects of financial stability on the financial structure. The results obtained affirm that Moroccan companies are in a hierarchical conception of the choice of financing and they prefer the use of internal financing with a particularity where companies with long experience are less and less attracted by external financing. In addition, financial stability significantly affects the choice of financing method. Indeed, when the financial system is stable, companies prefer to use external financing, which results in over-indebtedness that negatively affects the stability of the Moroccan financial system in a second rank. We generalize this theoretical conception to assert that the degree of financial stability can have effects on the choice of the financial structure of companies.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial structure; banking system; pecking order; financial stability
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G3 - Corporate Finance and Governance

References

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