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Cross-country Determinants of Partial Adjustment Speed toward Target Capital Structure
capital structure theories
target capital structure
partial adjustment model
fixed effect panel model
|Issue Date: ||2009-09-17 19:16:37 (UTC+8)|
Recent empirical literature provides evidences that firms in most developed countries do partially adjust toward their target capital structure. In this paper, we show that no only firms in developed countries, but also those in emerging countries gradually move back to their long-run equilibrium when they are away from it. But the adjustment speeds vary from country to country. We study the determinants of adjustment speeds around the world by focusing on differences in laws and regulations across countries. Our evidences show that firms in countries with common-law tradition, stronger shareholder right, or more completed accounting standards tend to move back to their optimal leverage quicker. Furthermore, we add two variables related to other two main capital structures (pecking order and market timing) in our analysis to capture their effects. Both theories add some information in explaining capital structure, but the impacts differ when applying different leverage measures. When we define leverage ratio as long-term debts dividend by net assets, we observe that pecking order factor lowers the adjustment speed a lot. And the magnitude of decrease on adjustment speed is significantly correlated with market condition, law enforcement, corporate tax rate and accounting standard. More developed countries and countries with stronger law enforcement, higher corporate tax rate, or more completed accounting standards tend to have less reduction on adjustment speed when including pecking order factor, because they have less information asymmetries.
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|Source URI: ||http://thesis.lib.nccu.edu.tw/record/#G0093357008|
|Data Type: ||thesis|
|Appears in Collections:||[財務管理學系] 學位論文|
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