Firm heterogeneity, macroeconomic conditions and capital structure adjustment speeds: Evidence from the JSE

Chipeta, Chimwemwe; Mbululu, Douglas

doi:10.1080/10293523.2013.11082557

Cited by 22 publications

(26 citation statements)

References 31 publications

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“…• GDP: This is measured as the monetary value of all goods and services produced in the country. Several studies (Beck et al, 2008;De Jong et al, 2008;Chipeta and Mbululu, 2013) found that companies operating in a country with increased GDP have a higher level of economic wealth and tend to issue more debt than equity. This implies increased GDP has direct relationship with leverage.…”

Section: Methodology and Sources Of Datamentioning

confidence: 99%

Macroeconomic and institutional determinants of firms% choices of capital structure in Nigeria: a system-GMM approach

Apanisile

Olayiwola

2019

IJBEM

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The study investigates whether external environment in which firms operate plays any role in the choice of corporate capital structure decision in Nigeria. A panel data of 66 listed companies, comprising firms' leverage, macroeconomic variables and institutional quality, are used. Data are collected from World Development Indicator, OPEC annual oil price statistics, annual reports and accounts of selected listed companies, fact books published by Nigerian stock exchange and International Country Risk Guide between 1999 and 2015. The study employs pooled OLS, random effect and system-GMM for the analysis. Results show that external environment plays important role in the choice of firm's capital structure as macroeconomic variables and institutional quality variable have significant results. Macroeconomic variables such as inflation, oil price, GDP and lagged value of the dependent variable, have positive and significant results on leverage. Other variables, such as exchange rate, corruption and investment have negative effects on leverage.

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Section: Methodology and Sources Of Datamentioning

confidence: 99%

Macroeconomic and institutional determinants of firms% choices of capital structure in Nigeria: a system-GMM approach

Apanisile

Olayiwola

2019

IJBEM

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“…Also the distance from the target capital structure influences significantly the speed of adjustment: the more the deviation from the target leverage value, the quicker companies strive to achieve the optimal value [12]; [50]; [51]; [52]; [23]; [53]; [46]; [22]. At the same time a series of papers produced opposite results [54]; [55]; [25], thus, the hypothesis of existence of a positive dependence may be discarded in actual practice.…”

Section: Research Hypothesesmentioning

confidence: 99%

Analysis of Determinants of the Speed of Adjustment to Target Capital Structure of Companies in Developing Economies

Nivorozhkin

Kireu

2020

КФ

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The financial stability of a company, along with its operational effectiveness, depend on whether the company endeavours to optimise its capital structure, and the speed at which it can do so. The purpose of this article is to assess the relative impact of influential factors on the speed of adjustment to the optimal capital structure of companies in emerging markets. The relevant factors in question include corporate determinants, macroeconomic determinants, the specific financial characteristics of BRICS companies, and other pertinent external macroeconomic conditions. To achieve this, we conducted a comparative study of various assessment methodologies and examined their findings. Within the scope of the overall study aims, we considered various models of assessing the speed of adjustment and identified those study methods most frequently used. We identified the determinants of optimal capital structure and the related speeds of adjustment, and suggested hypotheses based on assumed assessment results. We then proceeded to analyse the sustainability of those results and gauge the overall robustness of our approach. The study results reveal that the speed of adjustment to target capital structure in developing economies is significantly higher than in advanced economies. The results indicate that these speeds vary in the range of 31–46% for book values of financial leverage and 60–79% for its market values. An empirical analysis of these results also showed that companies with a less-than-optimal debt level achieved the optimum level much quicker, and the speed of adjustment thereby depends heavily on the absolute value of the company money flow. Moreover, this is especially true in those companies with an excessive leverage value. Financial instability in the markets, meanwhile, had a positive effect upon the speed of adjustment for Chinese and Brazilian companies, while in the other BRICS countries the change of the speed of adjustment in the period of crisis finds no confirmation.

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“…Second, due to widespread occurrence of analytical recommendations about major companies, a lower information asymmetry with creditors or investors is typical of them [Aybar-Arias et al, 2012]. Apart from that, major companies have significantly lower fixed costs pertaining to share repurchases than small companies [Chipeta, Mbululu, 2013]. Therefore, major companies have a higher speed of adjustment to the target capital structure.…”

Section: Higher School Of Economicsmentioning

confidence: 99%

“…A high inflation rate exerts a significant influence on the balance sheet values of the debt and joint-stock capital giving the companies the opportunity to influence more the balance sheet values of the leverage, increasing the speed of adjustment [Haas, Peeters, 2006]. A high inflation rate may affect adversely the actual cost of raising debt capital, and this also should increase the speed of adjustment [Chipeta, Mbululu, 2013]. Hypothesis 9: the higher the inflation rate in a country, the higher the speed of adjustment of the capital structure to the target value as a result of share repurchase.…”

Section: Higher School Of Economicsmentioning

confidence: 99%

Capital Structure Management by Share Repurchase for Companies in Emerging Markets

Kulik¹,

Макарова²

2018

КФ

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According to foreign research into developed markets, share repurchasing influences the speed of adjustment of companies' capital structure to the target level. It is worth noting that the number of such research studies for emerging markets is rather small.On the basis of an empirical study of a selection of 275 companies from BRICS countries involved in share repurchase for the period of 2005 to 2015 we prove here that share repurchase is an efficient method of correcting an existing capital structure, aligning it to approximate a target level in all BRICS countries. It should be noted that in accordance with our results, companies from Brazil and Russia show the highest speed of adjustment (within 63-80%). This indicates that these companies are able to achieve the target structure within a very short period. Companies from the other countries (India, China, and South Africa) also show a rather high rate of the speed of adjustment (in the range of 44 to 49%).It is worth noting that apart from the share repurchase itself, characteristic features of the companies (as well as special characteristics of local economic factors where they are relevant) influence the speed of adjustment to the target capital structure. We also found out that the most significant factors which have positive effects on the speed of adjustment are the company size, its growth prospects, share of repurchased shares, economic growth rate, inflation rate in the country which adversely affect to a great extent the speed of adjustment to the target capital structure. For Russian companies the most significant determinants are the company size, share of repurchased shares and inflation rate.An assessment of the speed of adjustment to the target capital structure of companies repurchasing shares showed that for Russian companies (for a balance sheet leverage) and for South African companies (for a market financial leverage) the speed of adjustment is not significant, however in general the countries selection and each sub-selection shows that BRICS countries' companies are prone to adjust to the target capital structure quicker when the financial leverage is lower than the target value, while companies with an excess debt load optimize much slower.On the basis of the research results we offer an algorithm pertaining to capital structure management for the companies acting in emerging markets using share repurchase in an open market.

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Firm heterogeneity, macroeconomic conditions and capital structure adjustment speeds: Evidence from the JSE

Cited by 22 publications

References 31 publications

Macroeconomic and institutional determinants of firms% choices of capital structure in Nigeria: a system-GMM approach

Macroeconomic and institutional determinants of firms% choices of capital structure in Nigeria: a system-GMM approach

Analysis of Determinants of the Speed of Adjustment to Target Capital Structure of Companies in Developing Economies

Capital Structure Management by Share Repurchase for Companies in Emerging Markets

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