Abstract
The Arab Spring (AS) was one of the most impactful political instabilities that significantly affected the Middle East and North Africa region, both economically and financially, especially in Egypt. To stabilise the situation, the government floated the Egyptian currency at the end of 2016. Both events increased the concerns of stock market investors and creditors, which challenged firms to access external sources of funds. Due to the lack of studies examining the impact of those events on the Capital Structure (CS) decision, this thesis’s objectives are to examine: i. The impact of the AS and the 2016 Egyptian Pound Floatation on CS; ii. The moderating impact of those two events on the association between tangibility, firm size, liquidity, profitability, business risk, asset growth, tax effect, and non-debt tax shield and CS; iii. The direct relationship between ESG disclosure, its two dimensions, Environmental and Social Disclosure (ESD) and Governance Disclosure (GD), and the eight pillars formulating the ESG overall score and CS, iv. The moderating impact of the two events on the association between ESG disclosure and CS in 125 firms listed in the Egyptian Stock Market over 13 years using the System Generalized Method of Monument. Therefore, the outcome of this thesis is considered one of the first studies that contribute to the literature by filling the knowledge gap and providing interested parties with a comprehensive insight into the impact of different events of uncertainty on CS decisions and their moderating impact on CS determinants using different dimensions from the Egyptian context.It has been found that Egyptian firms decreased their Long-term Debt (LTD) during and after the AS and after the 2016 EGP floatation, while they increased their Short-term Debt (STD) during the AS. Furthermore, firm size was the key determinant of absorbing STD during and after the AS. Firms with high asset growth depended more on STD during the AS, while they depended on LTD after the AS. It is further evident that profitable firms with high liquidity and a non-debt tax shield increased their LTD during the AS. Finally, it is found that AS mainly affected the relationship between firm-level factors and LTD; in contrast, the 2016 EGP mainly influenced the association between the chosen firm-level factors and STD. For the direct association considering both events, it is found that large firms with lower profitability, tax effect, and non-debt tax shield consume a higher level of TD, while profitable firms with low asset growth had a lower STD, and large firms with high tangibility and lower tax effects depended more on LTD. This is consistent with the pecking order and trade-off theories, with the exception of the association between the tax effect and LTD.
Furthermore, it is evident that ESG disclosure and GD are negatively related to TD, which is consistent with agency theory. Environmental disclosure was the only pillar that positively affected TD, particularly the LTD, while employee, community, and board of directors disclosures were negatively associated with debt financing. It was also found that the AS and 2016 currency floatation did not affect the negative association between overall ESG disclosure and TD. However, splitting the overall ESG disclosure into two dimensions shows that LTD was positively related to ESD while negatively related to GD during and after the AS and the 2016 EGP floatation. Among the eight pillars, customer disclosure was the key determinant that witnessed a significant change across the three proxies. It positively affected the CS during and after the AS. Moreover, it was found that after the 2016 floatation, ESD was negatively related to STD, while a positive association developed between GD and STD. Finally, the outcome of this thesis revealed that each dimension and pillar had a different impact on CS, and the two events had a different impact on the association between them. Accordingly, the outcome of this study is beneficial for policymakers, firms’ decision-makers, and future academicians.
| Date of Award | 17 Jun 2024 |
|---|---|
| Original language | English |
| Supervisor | Thitima Sitthipongpanich (Main Supervisor) & Pamela Anderson (Co-Supervisor) |