TITLE:
Determinants of Capital Structure, Cash Holdings, and Earnings Quality among ASX-Listed Firms: Cross-Sectional Evidence for FY2025
AUTHORS:
Ibrahim Majed M. Hablayn
KEYWORDS:
Capital Structure, Pecking Order, Trade-off Theory, Cash Holdings, Accruals, Earnings Quality, ASX, Australia
JOURNAL NAME:
Open Journal of Accounting,
Vol.15 No.4,
August
26,
2026
ABSTRACT: This study examines the firm-level determinants of capital structure, cash holdings, profitability, and the consistency between accruals and operating cash flows for a sample of 113 firms listed on the Australian Securities Exchange (ASX), using audited financial-statement data for fiscal years 2024 and 2025. Working from a standardized panel of eleven accounting ratios, we estimate four ordinary least squares (OLS) models with heteroskedasticity-robust standard errors and subject each to an extensive robustness programme (winsorization, sample screens, alternative covariance estimators, firm-type fixed effects, a pooled panel with firm-clustered standard errors, and influence diagnostics). We find strong and stable evidence that firm size is positively associated with leverage, consistent with trade-off theory, and qualified evidence that profitability is negatively associated with leverage, consistent with the pecking-order view; the latter result is sensitive to the treatment of outliers but strengthens under sample expansion, fixed effects, and influence-trimming. Larger firms hold less cash relative to assets, while the relation between leverage and cash holdings is statistically insignificant. Accruals are strongly negatively related to operating cash flow, in line with the established accruals-cash-flow relation. Because the accrual measure is constructed as net profit minus operating cash flow, we interpret this model as an accrual-cash-flow consistency check rather than a standalone test of earnings quality; an alternative specification omitting the mechanical regressor confirms the negative relation. The determinants of contemporaneous return on assets are weakly identified in this cross-section. The findings are broadly consistent with the international capital-structure literature while highlighting the limitations of a small, single-year, accounting-only sample. We discuss implications and outline extensions using market data.