Cognitive evaluation of capital structure: Effect of cognitive factors on the debt ratio in Mexican construction industry

Abstract
This study analyzes the impact of the construct of the capital structure on the observed debt ratio of an organization, in terms of the new approach of Cognitive Finance (Pérez et al, 2019) within the construction industry in Mexico. Using exploratory factor analysis and structural equation model (SEM), latent variables of capital structure from the responses to an instrument applied to 154 CFOs of construction companies in Mexico. Then a non-parametric correlation test is performed, to measure the impact of each latent variable on the observed debt-to-equity ratio. The study finds that concerns about the political environment, the trust from clients and suppliers, among other variables, have an impact in the decisionmaking process of construction CFOs related to the debt-to-equity ratio, in addition to those variables stablished by Traditional Financial Theory. The results suggest that unobservable variables must be considered to gain a deeper understanding of the decision-making process and that an integral vision to consider the study of the motivations that are behind of the observable financial behavior is necessary.