The relationship between goodwill and capital structure and the moderating effect of financial market development


  • Oli Ahad Thakur Department of Business Administration, International Standard University, Dhaka, Bangladesh
  • Matemilola Bolaji Tunde Universiti Putra Malaysia, Serdang, Malaysia
  • Bany-Ariffin Amin Noordin Universiti Putra Malaysia, Serdang, Malaysia
  • Md. Kausar Alam Brac Business School, Brac University, Dhaka, Bangladesh
  • Muhammad Agung Prabowo Faculty of Economics and Business, Universitas Sebelas Maret, Surakarta, Indonesia


Capital structure, Goodwill, Information asymmetry, Financial market development, Panel data analysis



This study empirically investigates the relationship between goodwill assets and capital structure (i.e. debt ratio) of firms and the moderating effect of financial market development on the relationship between goodwill assets and capital structure.


This research applied a quantitative method. The article collects large samples of listed firms from 23 developing and nine developed countries and applied the panel data techniques. This research used firm-level data from the DataStream database for both developed and developing countries. The study uses 4,912 firm-level data from 23 developing countries and 4,303 firm-level data from nine developed countries.


The findings reveal a significant positive relationship between goodwill assets and capital structure in developing countries, but goodwill assets have a significant negative relationship with capital structure in developed countries. Moreover, financial market development positively moderates the relationship between goodwill assets and the capital structure of firms in developing countries. The results inform firm managers that goodwill assets serve as additional collateral to secure debt financing. Moreover, policymakers should formulate a debt market policy that recognizes goodwill assets as additional collateral for the purpose of obtaining debt capital.

Research limitations/implications

The study has several implications. First, goodwill assets are identified as a factor of capital structure in this study. Fixed assets have been identified as one of the drivers of capital structure in previous research, although goodwill assets are seldom included. Second, this article shows that along with demand-side determinants, supply-side determinants also play an important role in terms of the firms' choice about the capital structure. Therefore, firms should take both the demand-side and supply-side factors into consideration when sourcing for external financing (i.e. debt capital).


The study considered goodwill as a component of capital structure. The study analysis includes a large sample of enterprises, including 4,912 big firms from 23 developing countries and 4,303 large firms from nine industrialized or developed countries, which adds to the current capital structure information. Furthermore, a large sample size increases the results' robustness and generalizability.



Download data is not yet available.


Acedo-Ramírez, M.A. and Ruiz-Cabestre, F.J. (2014), “Determinants of capital structure: United Kingdom versus continental European countries”, Journal of International Financial Management and Accounting, Vol. 25 No. 3, pp. 237-270, doi: 10.1111/jifm.12020.

Akerlof, G.A. (1970), “The market for “lemons”: quality uncertainty and the market mechanism”, The Quarterly Journal of Economics, Vol. 84 No. 3, pp. 488-500, doi: 10.2307/1879431.

Akhtar, S. and Oliver, B. (2009), “Determinants of capital structure for Japanese multinational and domestic corporations”, International Review of Finance, Vol. 9 Nos 1-2, pp. 1-26, doi: 10.1111/j.1468-2443.2009.01083.x.

Al-Najjar, B. and Hussainey, K. (2011), “Revisiting the capital-structure puzzle: UK evidence”, Journal of Risk Finance, Vol. 12 No. 4, pp. 329-338, doi: 10.1108/15265941111158505.

Alves, P.F.P. and Ferreira, M.A. (2011), “Capital structure and law around the world”, Journal of Multinational Financial Management, Vol. 21 No. 3, pp. 119-150, doi: 10.1016/j.mulfin.2011.02.001.

Antoniou, A., Guney, Y. and Paudyal, K. (2008), “The determinants of capital structure: capital market-oriented versus bank-oriented institutions”, Journal of Financial and Quantitative Analysis, Vol. 43 No. 01, pp. 59-92, doi: 10.1017/s0022109000002751.

Antzoulatos, A.A., Koufopoulos, K., Lambrinoudakis, C. and Tsiritakis, E. (2016), “Supply of capital and capital structure: the role of financial development”, Journal of Corporate Finance, Vol. 38, pp. 166-195, doi: 10.1016/j.jcorpfin.2016.01.011.

Atakan, A.E. and Ekmekci, M. (2014), “Auctions, actions, and the failure of information aggregation”, American Economic Review, Vol. 104 No. 7, pp. 2014-2048, doi: 10.1257/aer.104.7.2014.

Azad, A.S.M.S., Azmat, S., Fang, V. and Edirisuriya, P. (2014), “Unchecked manipulations, price-volume relationship and market efficiency: evidence from emerging markets”, Research in International Business and Finance, Vol. 30 No. 1, pp. 51-71, doi: 10.1016/j.ribaf.2013.05.003.

Baker, M. and Wurgler, R. (2002), “Market timing and capital structure”, Journal of Finance, Vol. 57, pp. 1-32, doi: 10.1111/1540-6261.00414.

Bas, T., Muradoglu, G. and Phylaktis, K. (2009), “Determinants of capital structure in developing countries”, Cass Business School, London EC1Y 8TZ, (June 2014), pp. 1-38, available at:

Bhaduri, S. (2002), “Determinants of corporate borrowing: some evidence from the Indian corporate structure”, Journal of Economics and Finance, Vol. 26 No. 2, pp. 200-215, doi: 10.1007/bf02755986.

Bilgin, R. and Dinc, Y. (2019), “Factoring as a determinant of capital structure for large firms: theoretical and empirical analysis”, Borsa Istanbul Review, Vol. 19 No. 3, pp. 273-281, doi: 10.1016/j.bir.2019.05.001.

Black, E.L., Carnes, T.A. and Richardson, V.J. (2000), “The market valuation of corporate reputation”, Corporate Reputation Review, Vol. 3 No. 1, pp. 31-42, doi: 10.1057/palgrave.crr.1540097.

Çam, I. and Özer, G. (2022), “The influence of country governance on the capital structure and investment financing decisions of firms: an international investigation”, Borsa Istanbul Review, Vol. 22 No. 2, pp. 257-271, doi: 10.1016/j.bir.2021.04.008.

Chakrabarti, A. and Chakrabarti, A. (2019), “The capital structure puzzle– evidence from Indian energy sector”, International Journal of Energy Sector Management, Vol. 13 No. 1, pp. 2-23, doi: 10.1108/IJESM-03-2018-0001.

Chakraborty, I. (2010), “Capital structure in an emerging stock market: the case of India”, Research in International Business and Finance, Vol. 24 No. 3, pp. 295-314, doi: 10.1016/j.ribaf.2010.02.001.

Chatterjee, C., Shroff, A.A. and Sivaramakrishnan, K. (2022), “Debt contracting and the goodwill debate”, Journal of Contemporary Accounting and Economics, Vol. 18 No. 2, 100316, doi: 10.1016/j.jcae.2022.100316.

Claessens, S. and Laeven, L. (2003), “Financial development, property rights, and growth”, The Journal of Finance, Vol. 58 No. 6, pp. 2401-2436, doi: 10.1046/j.1540-6261.2003.00610.x.

De Jong, A., Kabir, R. and Nguyen, T.T. (2008), “Capital structure around the world : the roles of firm- and country-specific determinants”, Journal of Finance and Banking, Vol. 32 No. 9, pp. 1954-1969, doi: 10.1016/j.jbankfin.2007.12.034.

DeAngelo, H. (2022), “The capital structure puzzle: what are we missing?”, Journal of Financial and Quantitative Analysis, Vol. 57 No. 2, pp. 413-454, doi: 10.1017/s002210902100079x.

Demirguç-Kunt, A. and Maksimovic, V. (1999), “Institutions, financial markets, and debt maturity”, Journal of Financial Economics, Vol. 54 No. 1, pp. 295-336, doi: 10.1016/s0304-405x(99)00039-2.

Demirgüç-Kunt, A., Feyen, E. and Levine, R. (2013), “The evolving importance of banks and securities markets”, World Bank Economic Review, Vol. 27 No. 3, pp. 476-490, doi: 10.1093/wber/lhs022.

Djankov, S., McLiesh, C. and Shleifer, A. (2007), “Private credit in 129 countries”, Journal of Financial Economics, Vol. 84 No. 2, pp. 299-329, doi: 10.1016/j.jfineco.2006.03.004.

Fan, J.P.H., Titman, S. and Twite, G. (2012), “An international comparison of capital structure and debt maturity choices”, Journal of Financial and Quantitative Analysis, Vol. 47 No. 1, pp. 23-56, doi: 10.1017/S0022109011000597.

Frank, M.Z. and Goyal, V.K. (2009), “Capital structure decisions: which factors are reliably important?”, Financial Management, Vol. 38 No. 1, pp. 1-37, doi: 10.1111/j.1755-053X.2009.01026.x.

Gaud, P., Jani, E., Hoesli, M. and Bender, A. (2005), “The capital structure of Swiss companies: an empirical analysis using dynamic panel data”, European Financial Management, Vol. 11 No. 1, pp. 51-69, doi: 10.1111/j.1354-7798.2005.00275.x.

Giannetti, M. (2003), “Do better institutions mitigate agency problems? Evidence from corporate finance choices”, The Journal of Financial and Quantitative Analysis, Vol. 38 No. 1, pp. 185-193, doi: 10.2307/4126769.

Guizani, M. (2020), “The capital structure of islamic-compliant firms: is there a financing hierarchy?”, Asian Academy of Management Journal of Accounting and Finance, Vol. 16 No. 2, pp. 123-144, doi: 10.21315/aamjaf2020.16.2.6.

Hang, M., Geyer-Klingeberg, J., Rathgeber, A.W. and Stöckl, S. (2018), “Measurement matters—a meta-study of the determinants of corporate capital structure”, Quarterly Review of Economics and Finance, Vol. 68, pp. 211-225, doi: 10.1016/j.qref.2017.11.011.

Haron, R. (2018), “Firm level, ownership concentration and industry level determinants of capital structure in an emerging market: Indonesia evidence”, Asian Academy of Management Journal of Accounting and Finance, Vol. 14 No. 1, pp. 127-151, doi: 10.21315/aamjaf2018.14.1.6.

Harrison, B. and Wisnu Widjaja, T. (2014), “The determinants of capital structure: comparison between before and after financial crisis”, Economic Issues, Vol. 19 No. 2, pp. 55-82, doi: 10.1145/1823854. 1823900.

Henrique, M.R., Silva, S.B. and Saporito, A. (2021), “Capital structure, stock exchanges in Chile: 2007 to 2016”, Journal of Economics, Finance and Administrative Science, Vol. 26 No. 52, pp. 317-332, doi: 10.1108/jefas-10-2020-0328.

Hulten, C. and Hao, X. (2008), “What is a company really worth ? Intangible capital and the ‘market to book value’ puzzle”, NBER Working Paper Series, Vol. 25 No. 9, pp. 1682-1690, doi: 10.1007/s13398-014-0173-7.2.

Jappelli, T. and Pagano, M. (2002), “Information sharing, lending and defaults: cross-country evidence”, Journal of Banking and Finance, Vol. 26 No. 10, pp. 2017-2045, doi: 10.1016/S0378-4266(01)00185-6.

Jaworski, J., Santos, M.C.D. and Mota, J.H. (2022), “Which determinants matter for capital structure? Evidence from Polish and Portuguese nonfinancial firms”, European Review of Business Economics, Vol. 1 No. 01, pp. 27-60, doi: 10.26619/erbe-2021.01.2.

Jermias, J. and Yigit, F. (2019), “Factors affecting leverage during a financial crisis: evidence from Turkey”, Borsa Istanbul Review, Vol. 19 No. 2, pp. 171-185, doi: 10.1016/j.bir.2018.07.002.

Khémiri, W. and Noubbigh, H. (2018), “Determinants of capital structure: evidence from sub-Saharan African firms”, Quarterly Review of Economics and Finance, Vol. 70, pp. 150-159, doi: 10.1016/j.qref.2018.04.010.

Kumar, S., Colombage, S. and Rao, P. (2017), “Research on capital structure determinants: a review and future directions”, International Journal of Managerial Finance, Vol. 13 No. 2, pp. 106-132, doi: 10.1108/ijmf-09-2014-0135.

Luo, Y. (2015), “CEO power, ownership structure and pay performance in Chinese banking”, Journal of Economics and Business, Vol. 82, pp. 3-16, doi: 10.1016/j.jeconbus.2015.04.003.

Matemilola, B.T. and Ahmad, R. (2015), “Debt financing and importance of fixed assets and goodwill assets as collateral: dynamic panel evidence”, Journal of Business Economics and Management, Vol. 16 No. 2, pp. 407-421, doi: 10.3846/16111699.2013.772916.

Matemilola, B.T., Bany-Ariffin, A.N. and Azman-Saini, W.N.W. (2012), “Financial leverage and shareholder's required return: evidence from South Africa corporate sector”, Transition Studies Review, Vol. 18 No. 3, pp. 601-612, doi: 10.1007/s11300-012-0214-x.

Matemilola, B.T., Bany-Ariffin, A.N., Azman Saini, W.N.W. and Nassir, A.M. (2019), “Emerging Markets Review, Impact of institutional quality on the capital structure of firms in developing countries”, Emerging Markets Review, Vol. 39, pp. 175-209, 10.1016/j.ememar.2019.04.003.

Mc Namara, A., Murro, P. and O'Donohoe, S. (2017), “Countries lending infrastructure and capital structure determination: the case of European SMEs”, Journal of Corporate Finance, Vol. 43, pp. 122-138, doi: 10.1016/j.jcorpfin.2016.12.008.

M’ng, J.C.P., Rahman, M. and Sannacy, S. (2017), “The determinants of capital structure: evidence from public listed companies in Malaysia, Singapore and Thailand”, Cogent Economics and Finance, Vol. 5 No. 1, pp. 1-34, doi: 10.1080/23322039.2017.1418609.

Myers, S.C. (1984), “The capital structure puzzle”, The Journal of Finance, Vol. 39 No. 3, pp. 574-592, doi: 10.1111/j.1540-6261.1984.tb03646.x.

Ojah, K. and Karemera, D. (1999), “Random walks and market efficiency tests of Latin American emerging equity markets: a revisit”, The Financial Review, Vol. 34 No. 2, pp. 57-72, doi: 10.1111/j.1540-6288.1999.tb00454.x.

Öztekin, Ö. (2015), “Capital structure decisions around the world: which factors are reliably important?”, Journal of Financial and Quantitative Analysis, Vol. 50 No. 3, pp. 301-323, doi: 10.1017/s0022109014000660.

Pang, J. and Wu, H. (2009), “Financial markets, financial dependence, and the allocation of capital”, Journal of Banking and Finance, Vol. 33 No. 5, pp. 810-818, doi: 10.1016/j.jbankfin.2008.09.015.

Rajan, R. and Zingales, L. (1998), “Financial dependence and growth”, The American Economic Review, Vol. 88 No. 3, pp. 559-586, doi: 10.3386/w5758.

Rodrigues, S.V., Moura, H.J.d., Santos, D.F.L. and Sobreiro, V.A. (2017), “Capital structure management differences in Latin American and US firms after 2008 crisis”, Journal of Economics, Finance and Administrative Science, Vol. 22 No. 42, pp. 51-74, 10.1108/jefas-01-2017-0008.

Salamudin, N., Bakar, R., Kamil Ibrahim, M. and Haji Hassan, F. (2010), “Intangible assets valuation in the Malaysian capital market”, Journal of Intellectual Capital, Vol. 11 No. 3, pp. 391-405, doi: 10.1108/14691931011064608.

Sharma, P. (2017), “Is more information always better? A case in credit markets”, Journal of Economic Behavior and Organization, Vol. 134, pp. 269-283, doi: 10.1016/j.jebo.2016.12.002.

Sufi, A. (2007), “Information asymmetry and financing arrangements: evidence from syndicated loans”, The Journal of Finance, Vol. 62 No. 2, pp. 629-668, doi: 10.1111/j.1540-6261.2007.01219.x.

Thakur, O.A., Bany-Ariffin, A.N. and Bt, M. (2020), “Impact of goodwill on firms' capital structure in developing countries”, The Empirical Economics Letters, Vol. 19 No. 6, pp. 563-569.

Thakur, O.A., Noordin, B.A.A., Matemilola, B.T., Alam, M.K. and Setiawan, D. (2022), “Impact of goodwill on capital structure and the moderating role of investors' education”, Managerial and Decision Economics, Vol. 43 No. 7, pp. 2657-2677, doi: 10.1002/mde.3553.

Thakur, O.A., Amin Noordin, B.A., Matemilola, B.T. and Alam, M.K. (2023), “Impact of goodwill on firms capital structure in developed and developing countries: moderating effects of legal system”, Macroeconomics and Finance in Emerging Market Economies, Vol. 16 No. 3, pp. 1-20, doi: 10.1080/17520843.2023.2170068.

Touil, M. and Mamoghli, C. (2020), “Institutional environment and determinants of adjustment speed to the target capital structure in the MENA region”, Borsa Istanbul Review, Vol. 20 No. 2, pp. 121-143, doi: 10.1016/j.bir.2019.12.003.

Vo, X.V. and Ellis, C. (2017), “An empirical investigation of capital structure and firm value in Vietnam”, Finance Research Letters, Vol. 22 No. 2017, pp. 90-94, doi: 10.1016/

Widnyana, I.W., Wiksuana, I.G.B., Artini, L.G.S. and Sedana, I.B.P. (2020), “Influence of financial architecture, intangible assets on financial performance and corporate value in the Indonesian capital market”, International Journal of Productivity and Performance Management, Vol. 70 No. 7, pp. 1837-1864, (1999), doi: 10.1108/IJPPM-06-2019-0307.

Wurgler, J. (2000), “Financial markets and the allocation of capital”, Journal of financial Economics, Vol. 58 Nos 1-2, pp. 187-214.

Further reading

Aguinis, H., Ramani, R.S. and Alabduljader, N. (2018), “What you see is what you get? Enhancing methodological transparency in management research”, Academy of Management Annals, Vol. 12 No. 1, pp. 83-110, doi: 10.5465/annals.2016.0011.

Barney, J. (2018), “Editor's comments: positioning a theory paper for publication”, Academy of Management Review, Vol. 43 No. 3, pp. 345-348, doi: 10.5465/amr.2018.0112.

McCarthy, M.G. and Schneider, D.K. (1995), “Market perception of goodwill: some empirical evidence”, Accounting and Business Research, Vol. 26 No. 1, pp. 69-81, doi: 10.1080/00014788.1995.9729499.




How to Cite

Thakur, O. A., Bolaji Tunde, M., Amin Noordin, B.-A., Alam, M. K., & Agung Prabowo, M. (2024). The relationship between goodwill and capital structure and the moderating effect of financial market development. Journal of Economics, Finance and Administrative Science, 29(57), 121–145. Retrieved from