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Mounir Samir Ezzeddine

Diplômé DBA - 2016

Titre de thèse

Determinants of Capital Structure in GCC nonfinancial listed Firms.

Superviseur(s)

Michel Albouy

Dr. Mounir Ezzeddine has enjoyed a rich professional career in investment and private equity for over 18 years. He has managed different mandates, mainly for VCs and SMEs, and has had international exposure over three continents. Dr. Ezzeddine’s research agenda includes better understanding of the impact of innovation and R&D on firms’ profitability, capital structure, and growth.

The main purpose of this thesis is to explore the determinants of capital structure and test the interactions between international known theories and actual practices within professionals in a developing region reliant on oil exports revenues as main source for economic stimulus. The topic of capital structure has been a subject of investigation in finance since the seminal studies of (Modigliani and Miller, 1958, Modigliani and Miller, 1963). (Modigliani and Miller, 1958) irrelevance theory established the foundations of capital structure theory. They showed that in a perfect capital market the value of firm is independent of its capital structure choice. Since that, most of the capital structure theory development tested the irrelevance theory. Their second work implied that in a world with corporate taxes a firm's capital structure would consist of almost a 100 percent of debt. This extreme implication has led researchers to look for explanations to fill the gap between such prediction and observed capital structure of firms. Furthermore, it led to the view that firms act as if there is an optimal capital structure. Such assumptions established for the theories such as trade-off, and agency cost. Alternatively, (Myers, 1977) suggested the Pecking Order Theory of capital structure. He stated that because of information asymmetry; firms trail a "pecking order" in their financing decisions by using first internal funds rather than issuing securities. In order to explore the behaviour with the targeted region; this thesis focuses on two methods to derive conclusions: a survey amongst decision makers in listed non-financial firms in the targeted region; and an analysis for a regression for cross data panel for listed non-financial firms in the targeted region. The conclusions are that financing decisions of GCC listed non-financial firms are much better explained by the Pecking Order Theory rather than the Trade-Off Theory.