Article THE FIRM-SPECIFIC DETERMINANTS OF CAPITAL

Title:
STRUCTURE – AN EMPIRICAL ANALYSIS OF FIRMS BEFORE AND
DURING THE EURO CRISIS
Author(s): Amir Moradi1, Arnhem Business School, Faculty of Economics and Management
and Elisabeth Paulet2, ICN Business School, Department of Finance, Audit, Accounting and
Control
Publication Date: - This file of an unedited manuscript that has been accepted for publication on
14-7-2018.

Publication Information: - accepted for publication on 14-7-2018, 26 Page.

Reviewer: - Syadea

Summary of the article

The article revolve on the analysis of the effect of firm-specific determinants of capital structure
– an empirical analysis of firms before and during the euro crisis, the article took a sample of 559
European firms during and before Euro crisis which has occurred 1999-2015. The samples were
taken to be divided in to three sub samples demonstrating different industries: - retail tread and
services, Manufacturing and construction and transportation and tourism. The article has
concluded that leverage and debt-to-equity has a direct relationship with Size, asset tangibility,
non-debt tax shields and earning volatility whereas has an inverse relationship with net equity. In
addition to the above conclusion the authors has achieved from their research growth,
profitability, tax shied and the effect of euro crisis are positively related to net equity and
negatively related to leverage and debt-to-equity.

1
Analysis and Synthesis:

The most important conclusion that we have found on articulates of this article is the relationship
of some firm specific determinants towards book leverage, debt-to-equity and net equity. In
addition these important specific determinants are well expressed and addressed the significant
relationship with leverage referring to different literatures.

The results identified by the article is almost in the same page with the theoretical views
discussed in the class room. Though the theoretical view of accounting management mashes up
all industries and firms to a single type of firm and did not study where this specific determinants
and the euro crisis affects more. As a result the reviewed article here gives a unique vision of
different type of firm sectors due to the three subsampling of the 559 firms from different 6
European countries. This gives a new insight: different type of industries’ has different response
to determinants and euro crisis. The article expresses that firms who are vulnerable to the shocks
in the financial markets absorb the negative impact earlier than the others do and tis s a specific
and new detail compring to the thoretical views discussed in the class room.

Importance of the article

As our opinion the article has articulated enough depth in understanding of specific determinants
affecting capital structures, the sampling of the research has no limitation as to find the required
data for the analysis, the strong part of the research is the fact that it uses different important
reference material but did not relay on the finding of most literatures in fact in some areas we
notice that it has argued with the literature review issuing strong point from the conducted
research. We almost agree on each of the raised issues and conclusion as a result it helped us to
view the different sides of the capital structure response to euro crisis and more.

Thanks to the clear conclusion of the article now we understand what creditors will always seek.
In these regard if we had the opportunity to work in a big firm or manage the finance of our firm
we will definitely work on having asset tangibility and capital which will act as a guarantee for
creditor and confidence for the investors because as a result of economic crisis banks will not be
ideal to park money.

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Reactions and considered opinions

The overall flow and assessment of the research is well cooked and organized if we have to make
a considered opinion it might be on the sampling technic, the article describes that the samples
were taken from 6 euro registered country firms which have not dramatically suffered from
sudden decrease in national credit rating and have been relaying on their own credit rating. But it
might be so much clearer to compare if they could include some firm samples which have been
affected by sudden decrease in national credit rating. Beside the above point the inclusion of the
determinants in to the three subsamples, the data presentation, the analysis and conclusion are
clear specific and easy to understand.

Quality Checklist

• We have organized the article review in a logical fashion with ideas clearly and concisely stated.

• All information we stated follow correct bibliographic format.

• The summary which is stated at the beginning of the review paper include a brief explanation of
the article that includes the author's point of view.
• We have indicated our own recommendation on the sampling processes.

• We have summarize our personal response in a concluding statement.