Heterogeneity in the Speed of Capital Structure Adjustment across Countries and over the Business Cycle
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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in: European Financial Management, Jahrgang 21, Nr. 5, 01.11.2015, S. 936-973.
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Heterogeneity in the Speed of Capital Structure Adjustment across Countries and over the Business Cycle
AU - Drobetz, Wolfgang
AU - Schilling, Dirk C.
AU - Schröder, Henning
N1 - Publisher Copyright: © 2015 John Wiley & Sons Ltd.
PY - 2015/11/1
Y1 - 2015/11/1
N2 - This study analyses the heterogeneity in the speed of capital structure adjustment. Using a doubly-censored Tobit estimator that accounts for mechanical mean reversion in leverage ratios, the speed of adjustment is 25% per year in a large international sample, supporting the economic relevance of the trade-off theory. Differences in the adjustment speed across financial systems are attributable to differences in the costs of adjustment. Macroeconomic and micro-level supply-side constraints also affect the dynamics of leverage. Firms adjust more slowly during recessions, and the business cycle effect on adjustment speed is most pronounced for financially constrained firms in market-based countries.
AB - This study analyses the heterogeneity in the speed of capital structure adjustment. Using a doubly-censored Tobit estimator that accounts for mechanical mean reversion in leverage ratios, the speed of adjustment is 25% per year in a large international sample, supporting the economic relevance of the trade-off theory. Differences in the adjustment speed across financial systems are attributable to differences in the costs of adjustment. Macroeconomic and micro-level supply-side constraints also affect the dynamics of leverage. Firms adjust more slowly during recessions, and the business cycle effect on adjustment speed is most pronounced for financially constrained firms in market-based countries.
KW - Business cycle
KW - Capital structure
KW - Dynamic panel methods
KW - Institutional arrangements
KW - Speed of adjustment
KW - Management studies
UR - http://www.scopus.com/inward/record.url?scp=84904518691&partnerID=8YFLogxK
U2 - 10.1111/eufm.12048
DO - 10.1111/eufm.12048
M3 - Journal articles
AN - SCOPUS:84904518691
VL - 21
SP - 936
EP - 973
JO - European Financial Management
JF - European Financial Management
SN - 1354-7798
IS - 5
ER -