Role of Borrowed and Lease Debt Finance in Capital Structure

The study examined the role of borrowed and lease debt finance in determining the capital structure of companies across two independent categories. Four major debt finance variables, namely LTBDP, LTLLDP, STBDP, and STLLDP, were analysed using statistical techniques. The normality assessment revealed that the data did not follow a normal distribution, thereby necessitating the use of non-parametric methods for hypothesis testing. Consequently, the Mann–Whitney U test was identified as the most appropriate statistical technique for group comparison. The findings indicate that both borrowed debt and lease/liability debt constitute important components of corporate financing decisions. Long-term borrowed debt supports strategic and capital-intensive investments, while lease and liability financing contributes to operational flexibility and short-term financial management. The study highlights the importance of balanced debt financing practices in achieving an efficient capital structure. Overall, the analysis demonstrates that debt finance decisions are influenced by the financial policies and structural characteristics of companies, thereby playing a crucial role in long-term financial stability and organizational growth.  

1.      Myers, S. C. (2001). Capital structure. Journal of Economic perspectives, 15(2), 81-102. 2.      Rauh, J. D., & Sufi, A. (2010). Capital structure and debt structure. The review of financial studies, 23(12), 4242-4280. 3.      Bradley, M., Jarrell, G. A., & Kim, E. H. (1984). On the existence of an optimal capital structure: Theory and evidence. The journal of Finance, 39(3), 857-878. 4.      Dias Jr, A., & Ioannou, P. G. (1995). Debt capacity and optimal capital structure for privately financed infrastructure projects. Journal of Construction Engineering and Management, 121(4), 404-414. 5.      Chen, J., & Strange, R. (2005). The determinants of capital structure: Evidence from Chinese listed companies. Economic change and Restructuring, 38(1), 11-35. 6.      Sadiq, M., Yousaf, S. U., Anser, M. K., Sriyanto, S., Zaman, K., Van Tu, D., & Anis, S. N. M. (2023). The role of debt financing in the relationship between capital structure, firm’s value, and macroeconomic factors: To throw caution to the wind. The Quarterly Review of Economics and Finance, 87, 212-223. 7.      Graham, J. R., & Leary, M. T. (2011). A review of empirical capital structure research and directions for the future. Annual Review of Financial Economics, 3, 309–345. 8.      Parsons, C., & Titman, S. (2009). Empirical capital structure: A review. Foundations and Trends in Finance, 3(1), 1–93. 9.      Journal of Economics and Business. (2020). Determinants of capital structure complexity, 110, 105905. 10.   Kruk, S. (2021). Impact of capital structure on corporate value—Review of literature. Journal of Risk and Financial Management, 14(4), 155.