The impact of firm characteristics on the capital structure of the insurance industry in Bahrain is nowadays considered to be an important issue. Many insurance companies don't know what factors affect their capital structure, making ad-hoc, and sometimes inappropriate, decisions regarding their financial mix. We attempt to highlight the critical firm characteristics that managers should consider when setting their “optimal” capital structure. Our study is based on a multiple linear regression analysis using SPSS. Each independent variable along with the dependent variable is measured separately for a sample of insurance companies in Bahrain for the period of 2005-2009. Our research identifies a strong relationship between firm characteristics, such as (1) Tangibility of Assets, (2) Profitability, (3) Firm Size, (4) Revenue Growth, and (5) Liquidity, and observed capital structure, as represented by the Debt Ratio, although Profitability and Revenue Growth are not statistically significant and require further research.
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