We survey managers in 16 European countries on the determinants of capital structure.
Financial flexibility and earnings per share dilution are primary concerns of managers
in issuing debt and common stock, respectively. Managers also value hedging considerations
and use "windows of opportunity" when raising capital. We find that although a country's
legal environment is an important determinant of debt policy, it plays a minimal
role in common stock policy. We find that firms' financing policies are influenced
by both their institutional environment and their international operations. Firms
determine their optimal capital structures by trading off costs and benefits of financing.