Optimal Corporate Debt Policy under Growth Opportunities: Evidence from Mongolia

Ming Chang-Cheng, and Delgermurun Battulga

This paper investigates empirically the optimal debt structure policy in relation to growth opportunities under Myers’s theoretical framework using hand-collected data sets of non-financial listed firms in Mongolia for the period from 2012 to 2018 controlling for the effects of variables including tangibility, firm size, liquidity and profitability. The empirical results regarding the debt structure of non-financial listed firms in Mongolia are consistent with Myers's theoretical framework and the trade-off theory where high growth firms prefer to borrow less. The contribution of this study is to provide empirical evidence on optimal debt structure of growth firms in Mongolia, a developing country with comparably smaller capital markets, to find out whether results differ to that of previous studies which were conducted on countries with developing as well as developed capital markets.