Capital Structure Determinants among Construction Companies in South Korea: A Quantile Regression Approach

The present study empirically analyzed the capital structure determinants of 43 listed construction companies in Korea from 2000 to 2010 using multiple regression analysis. Specifically, the empirical analysis focused on changes in the coefficients of the determinants according to the leverage ratio quantiles of the examined construction companies. The empirical analysis found company and non-debt tax shield size to be positively related with leverage among construction companies, whereas profitability, growth, asset tangibility, and liquidity were found to be negatively related with leverage. The major results of the study are: 1) construction companies followed the static tradeoff theory in relation to size; 2) non-debt tax shields had quite limited effects on the capital-structure-related decisions of construction companies; 3) construction companies were found to follow the pecking order theory in relation to profitability; and 4) asset tangibility was estimated to have the opposite sign to that found in previous studies. These results were attributed to the characteristics of the construction business.