Measuring determinants and effects of firms' financial structure in a deleverage setting: Evidence from Italy

Since 2011, after ten year of growth, Italian non financial firms have heavily reduced their bank debt. Indeed, the ratio between bank credit to non financial sector and th e Italian GDP decreased from 92 5% to 83 5% in the last five years. This paper examines the determinants of this reduction using an OLS regression model performed on a sample of 12,9 74 Italian firms. In addition, we analyse the effect of this change in the capital structure on profitability and on debt service. Results show that Growth, Size, Tangibility and Profitability are associated with leverage, consistently with the previous li terature. Furthermore, we found that firm reduced their return on equity but improved their cash flow to debt ratio.