The Evolution of Capital Structure in Ireland 1984-2004

This thesis investigates the empirical determinants of Capital Structure choice in Ireland for the period 1984-2004. A total of 46 non-financial firms listed on the Irish stock exchange are identified resulting in a total of 966 observations. Both total debt and long term debt are taken as measures of leverage in this study while size, profitability, tangibility and growth opportunities are taken as proxies for the determinants of Capital Structure. Leverage is stepwise regressed on these determinants for four different time period. As in other countries, leverage in Irish firms increases with firm size and tangibility, and decreases with profitability levels. The results are consistent with the Static Trade-Off theory and the Pecking Order Hypothesis, although more evidence exists to confirm the latter theory. The analysis also shows that the imperfect information model where firms signal private information to outside investors by varying the level of debt is also of importance in explaining Irish firms Capital Structure.