Capital structure in Latin America: institutional and macroeconomic effects

Purpose This study analyzes the influence of institutional and macroeconomic factors, in addition to firm-level factors, on the capital structure of listed industrial Latin American (LATAM) companies. The objective is to provide empirical evidence on LATAM firms from (1) the perspective of the traditional trade-off and pecking order theories and (2) from approaches that introduce the impact of institutional and macroeconomic factors into the analysis. Design/methodology/approach The empirical analysis adopts an econometric methodology using panel data on companies from Argentina, Brazil, Chile, Colombia, Mexico and Peru from 2008 to 2018. Findings The results indicate that, in addition to the firm-level characteristics, the institutional and macroeconomic characteristics of the countries influence the capital structure of LATAM companies. Research limitations/implications The study presents some limitations. It is mainly focused on listed companies sourced from only six LATAM countries due to a lack of data. It would be advisable to carry out similar studies with corporate governance factors, family businesses and small and medium-sized enterprises (SMEs). Practical implications The results can serve as a reference for economic agents and professionals, encouraging them to consider the evolution of institutional and macroeconomic variables when making decisions. Academically, our findings verify the validity of conventional theories and the relevance of incorporating external institutional variables into the capital structure framework. Originality/value The importance of this research lies in analyzing the capital structure of companies in a little-explored geographic area, LATAM, including institutional and macroeconomic factors and using the new Orbis database.