The Case of Japanese Corporations.

This study aims to modernize capital structure determinants in line with changing economic environments by incorporating the function of intangible assets, particularly innovations, into capital structure decisions. Traditional independent variables such as tangibility, firm size, profitability, growth opportunities, and profitability have been thoroughly researched, but the growing importance of intangible assets and innovations in the contemporary economy with advanced technology calls for a reassessment of their impact on capital structures. I examine 95 enterprises listed in the Nikkei over 11 years (2014–2024) using cross-section generalized least squares regression and dynamic panel data estimation. Results show that corporate leverage decisions (debt-to-equity ratio) across Japanese firms are still significantly shaped by conventional factors, but innovations and intangible assets emerge as important determinants. Manufacturing companies have lower leverage than non-manufacturing companies, with tangibility as the main collateral. Higher market capitalization leads to decreased debtto-equity ratios, suggesting a reshaping of capital markets for firms.