# Macroeconomic Variables In Capital Structure

*…show more content…*

The study claimed that some firm-specific variables like tangibility, liquidity, and size have significant positive relationship with leverage while profitability has significant negative relationship with leverage which supports the POT of leverage. On the other hand, macroeconomic variable like GDP growth has a significant positive relationship with leverage. GDP growth rate is found to be positively related with leverage in the study of Bas et al., (2009) but GDP growth rate is also found to be negatively related with leverage in the studies of Gurcharan (2010) and Dincergok and Yalciner (2011). However, the authors also found a negative relationship between inflation and leverage. In addition, Chadegani et al., (2011) also reported a negative relationship between inflation and

*…show more content…*

Firm specific independent variables include liquidity, profitability, tangibility, debt coverage, growth rate, and size. On the other hand, macroeconomic variables include inflation, interest rate, GDP growth rate, and stock market development. The firm financial data are collected from the published annual reports of the twenty pharmaceutical companies over the period 2008-2013. We collected data from 2008 through 2013, totaling 120 observations for all firms. However, due to missing values, the number of observations was below 120 by the time we analyze the complete model for some