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Debt-oriented Capital Structure and Economic Growth: Panel Evidence for OECD Countries

Published online by Cambridge University Press:  19 June 2019

Syed Munawar Shah ,
Mariani Abdul-Majid  and
Zulkefly Abdul Karim
Syed Munawar Shah
Affiliation:
Faculty of Management Sciences, Balochistan University of Information Technology, Engineering and Management Sciences BUITEMS, City Campus, 87300, Quetta, Pakistan. Email: s.munawarshah@gmail.com and syed.munawar@buitms.edu.pk
Mariani Abdul-Majid
Affiliation:
Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600, UKM Bangi, Selangor, Malaysia
Zulkefly Abdul Karim
Affiliation:
Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600, UKM Bangi, Selangor, Malaysia
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Abstract

This paper examines the relationship between debt-oriented capital structure and economic growth by analysing a panel data of 16 European countries, based on the availability of data. We find that the corporate leverage in financial and non-financial corporations affects economic growth negatively. Furthermore, the results indicate that the leverage in non-financial corporations affects economic growth more than the leverage in financial corporations. This is due to the direct relationship between economic growth and the real sector and the fact that non-financial corporations in OECD countries hold more debt as compared with financial corporations.

Type
Articles
Information
European Review , Volume 27 , Issue 4 , October 2019 , pp. 519 - 542
Copyright
© Academia Europaea 2019 

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