Capital structure adjustment speed over the business cycle

Gan, Liu; Lv, Wujun; Chen, Yifei

doi:10.1016/j.frl.2020.101574

Cited by 16 publications

(24 citation statements)

References 14 publications

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“…Finally, it is worth paying attention to the market timing theory, which does not define the optimal capital structure but rather points out that certain conditions of the capital market and macroeconomic conditions that may affect the capital structure of the listed companies (Serghiescu and Văidean 2014). Gan et al (2021) showed that, in the event of macroeconomic risk, the speed of adapting the capital structure becomes much slower and enterprises adjust their debt faster under good macroeconomic conditions.…”

Section: Discussionmentioning

confidence: 99%

Impact of Capital Structure on Corporate Value—Review of Literature

Kruk

2021

JRFM

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The issue of capital structure in an enterprise is often described in the literature on the subject; however, theories are classified into various approaches, and their characteristics are often limited to selected theories. This work is an attempt at a synthetic presentation of the theory of capital structure. The aim of the article was to review and try to organise the most important theories of capital structure, paying attention to the influence of capital structure on the processes of creating value. The paper also highlights the most important theoretical works in this area. The study consists of two main parts. The first part indicates the diversity of defining the concepts of capital structure and indicates the approaches in classifying this structure. The second part characterises the theories of capital structure in the context of value creation. Based on the presented theories, it can be stated that there is no agreement as to whether and to what extent capital structure translates into the process of creating enterprise value. Therefore, it seems justified to conduct appropriate empirical research in this respect.

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Section: Discussionmentioning

confidence: 99%

Impact of Capital Structure on Corporate Value—Review of Literature

Kruk

2021

JRFM

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“…Many studies are devoted to the choice of the optimal capital structure that will allow the company to continue the growth and maintain the financial sustainability and profitability, even under the influence of external factors such as inflation and financial crises (Frank and Goyal, 2003;Vintil a et al, 2019). Some researchers (Gan et al, 2020;Restrepo et al, 2020) recognize the need to optimize the capital structure, but do not determine the critical share of borrowed funds. Chung et al (2013) introduce the concept of "firm survive probability" and reveal the optimal share of borrowed capital of 48.5% for the oil exploration companies.…”

Section: Impact Of Hightech Companies' Performancementioning

confidence: 99%

“…However, the combined effect of growth and profitability on leverage is an open and unresolved issue. The instability and inconsistencies in developmental level of countries can be an important factor analyzing the changes in the financial performance of companies especially during the crisis (Gan et al , 2020; Sikveland and Zhang, 2020; Spitsin et al , 2020a; Vukovic et al , 2021). Because of this, the relationship between financial leverage and company growth is of particular importance in transition economies, where economic crisis can significantly worsen the financial condition of companies and prospects for their development (Akinlo and Asaolu, 2012).…”

Section: Introductionmentioning

confidence: 99%

The impact of high-tech companies’ performance and growth on capital structure

Spitsin

Vuković

Spitsina

et al. 2021

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Purpose The purpose of this paper is to investigate the joint influence of two factors (companies’ performance and growth) on the company’s capital structure and to determine the conditions for financially sustainable competitive strategies in the coordinates profitability and growth. Design/methodology/approach The study sample includes 1,996 companies from 6 high-tech industries in Russia (panel data: 7,984 observations). The authors use regression models with random effects and carry out a three-dimensional visualization of the resulting dependencies. Findings The study found that profitability improves the capital structure (reduces the share of borrowed capital) and, on the contrary, the growth of companies (assets growth or sales growth) increases the leverage ratio. In the case of assets growth, the combined influence of two factors reduces the negative effect of assets growth. The results have shown that the outstripping growth of most high-tech companies requires an increase in debt capital and deterioration in the capital structure and financial stability. Practical implications In general, based on the results of this study, the authors have identified groups of fast-growing companies that need financial support, and have defined the main areas of impact (reducing the loan burden and increasing profitability) that will allow these companies to maintain high growth rates and demonstrate advanced development. Originality/value The relationships (which the authors identified between the control variables, the studied variables and leverage) were obtained for the first time for a sample of companies in high-tech industries and services in bigger transition country (Russia).

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“…One way to achieve and attain the optimum speed of adjustments is to determine a generalised predictor and aggregated factors that influence it (Gan and Chen, 2021;Giovanni et al, 2021;Cardoso and Pinheiro, 2020;Ezeani, 2019). For example, Haron et al (2013) argued that the speed of adjustment relies on the firm's size and period due to the adjustment costs incurred by the firms.…”

Section: Introductionmentioning

confidence: 99%

Effect of Speed of Adjustments on Capital Structure Decision: A Conceptual Analysis

Damina

Muritala

Ibrahim

2022

IJEFI

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This study conceptually examines the effect of speed of adjustments on capital structure decisions. The study provides a conceptual and theoretical underpinning focused on the review of several studies on the effect of speed of adjustments on capital structure decisions. The study discovered firm size, assets, growth, profitability, and other factors that influence the speed of adjustments. The findings from a prior study showed that estimators of the speed of adjustments include the regression analysis, generalized methods of moments (GMM) and stochastic frontier analysis (SFA) models without a predictive model. The study recommends for a generalized predictive model that determines the speed of adjustments to the optimum capital structure of firms.

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Capital structure adjustment speed over the business cycle

Cited by 16 publications

References 14 publications

Impact of Capital Structure on Corporate Value—Review of Literature

Impact of Capital Structure on Corporate Value—Review of Literature

The impact of high-tech companies’ performance and growth on capital structure

Effect of Speed of Adjustments on Capital Structure Decision: A Conceptual Analysis

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