Corporate Capital Structure Choices in MENA: Empirical Evidence from Non-Listed Firms in Morocco

Achy, Lahcen

Report

Malcolm H. Kerr Carnegie Middle East Center

Corporate Capital Structure Choices in MENA: Empirical Evidence from Non-Listed Firms in Morocco

A multi-decade survey of Moroccan manufacturing firms reveals the rationale behind their financial choices and provides the basis for an assessment of the severity of the financial constraints they face.

By Lahcen Achy

Published on Dec 16, 2009

Source: Middle East Development Journal

According to multi-decade survey results, more than three quarters of Moroccan manufacturing firms identify access to finance as one of the major constraints affecting their performance. Compared to a number of emerging countries, however, Moroccan firms appear relatively undercapitalized and more reliant on external finance. These two findings have very different policy implications.

In a new paper, Lachen Achy provides a rigorous understanding of the rationale behind financial choices made by Moroccan firms, and assess the severity of the financial constraints they face. The paper uses a panel dataset covering 550 non-listed manufacturing firms over the period 1998–2003 and investigates both long-term and short-term measures of leverage with the objective of understanding the factors that shape “debt-equity choice” as well as “debt maturity structure”.

His analysis reveals the existence of a negative relationship between asset tangibility and both aggregate leverage and short-term debt ratio.Small firms tend to increase their debt instead of opening their capital to outside investors and larger firms seem to rely much more on their retained earnings for their long-term financial needs. For short-term debt, size does not appear to matter. The impact of growth is positive on short-term leverage and irrelevant for long-term leverage. Profitability is found to exert a positive effect on long-term leverage and a negative one on short term leverage.

About the Author

Lahcen Achy

Former Nonresident Senior Associate, Middle East Center

Achy is an economist with expertise in development, institutional economics, trade, and labor and a focus on the Middle East and North Africa.

Recent Work

In The Media
Arab States Need Industrial Policy Reform
- Lahcen Achy
Paper
The Price of Stability in Algeria
- Lahcen Achy

Maghreb Economy

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

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