Determinants of Capital Structure: Evidence from the Emerging Market – the case of the Baltic Region

Firm capital structure is one of the most widely researched topics in corporate finance. However, the results are not always consistent and applicable from one market to another when explaining financing patterns. The majority of available research focuses on finding the role of firm-specific factors to leverage while ignoring macro and institutional factors. This paper examines how the capital structure of firms in the Baltic is influenced by both firm level and country level determinants. The study demonstrates that changes in leverage of firms in the Baltic is subject to both changes in firm specific characteristics, such as asset tangibility, growth opportunity, firm size and liquidity, as well as the changes in macro and institutional factors namely bank development, stock development and financial openness to different extent.