Abstract:
The purpose of this study was to empirically investigate the determinants of capital structure
decision in Ethiopian insurance private companies. In order to achieve the intended purpose
employed the explanatory research design and quantitative approach. The study used descriptive
and inferential statistics. The dependent variable as measured by total debt ratio. Researcher
used fixed effects model with the help of EVIEWS 9 software. The study used eight private
insurance companies selected by judgmental sampling technique. Researcher used secondary
data. Audited financial statement obtain from NBE and macroeconomic factors obtain from
MoFED, covering the period of 15 years; 2004-2018.Fitness was tested using Normality,
Multicollinearity, Heteroskedasticity, Autocorrelation .Diagnostics fixed effects tests on the data
used for the model. The findings of the study shows that liquidity, asset tangibility and
profitability were significant negative effect on leverage, whereas size of companies was
significant positive effects on leverage and external factor GDP was significant negative effects
on leverage. The fixed effect results confirm pecking order theory. Therefore, managers of these
sectors should consider the impacts of these significant variables, and follow pecking order
pattern, to achieve optimal capital structure
