Original Research

Capital structure and COVID-19: Lessons learned from an emerging market

Marise Mouton, Lydia Pelcher
Acta Commercii | Vol 23, No 1 | a1125 | DOI: https://doi.org/10.4102/ac.v23i1.1125 | © 2023 Marise Mouton, Lydia Pelcher | This work is licensed under CC Attribution 4.0
Submitted: 18 January 2023 | Published: 15 June 2023

About the author(s)

Marise Mouton, Department of Commercial Accounting, College of Business and Economics, University of Johannesburg, Johannesburg, South Africa
Lydia Pelcher, Department of Commercial Accounting, College of Business and Economics, University of Johannesburg, Johannesburg, South Africa


Orientation: Coronavirus disease 2019 (COVID-19) and the subsequent lockdown regulations restricted ongoing trade for most retail firms. Business strategies had to be adjusted to avoid a grand challenge of insolvency.

Research purpose: This paper provides previously unavailable empirical evidence of firm-level capital structure and determinants in relation to the COVID-19 pandemic for the firms in the retail sector in an emerging market.

Motivation for the study: Capital structure decisions, as influenced by the pandemic, provide novel value because such decisions are usually long-term, yet the volatile uncertainty of the pandemic negated the long-term cycle.

Research design, approach and method: A correlational design was followed to identify and interpret how retail firms reacted during the initial lockdown period. This was completed using a quantitative method, doing statistical analysis to describe and interpret possible relationships. The secondary data ranged from 2009 to 2021 for 11 South African listed retail firms was collected from EquityRT® and INET BFA. Data were analysed using descriptive statistics and panel data analysis by Eviews 12 software.

Main findings: The pandemic, measured using a dummy variable, was found to have a significant effect on capital structure together with risk, profitability, size and age. Liquidity, tangibility and growth were insignificant. Overall, capital structure proxied by the debt-equity ratio was reduced timeously without exhibiting dependence on short-term funds.

Practical/managerial implications: The retail firms exhibited exemplary capital structure decision-making behaviour during the COVID-19 pandemic.

Contribution/value-add: The empirical evidence of the effect of the COVID-19 pandemic on the capital structures and its determinants of retail firms in South Africa is the contribution of this study. Based on the findings, two conflicting capital structure theories (pecking order and trade-off theories) were part of the decision-making process, creating the cautious behaviour for these retail firms.


COVID-19; pandemic; capital structure; determinants; panel data analysis.

JEL Codes

G32: Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill

Sustainable Development Goal

Goal 8: Decent work and economic growth


Total abstract views: 897
Total article views: 1018

Crossref Citations

No related citations found.