The Dynamics of Capital Structure

Banerjee, Saugata; Heshmati, Almas; Wihlborg, Clas

doi:10.1016/s1567-7915(04)04011-x

Cited by 112 publications

(105 citation statements)

References 14 publications

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“…Finally, the results for the impact of firm size (SIZE) on the adjustment speed are mixed and do not allow further interpretation. Specifically, we cannot confirm the finding in Lööf (2003) and Bane rjee, Heshmati, and Wihlborg (2000) that large firms are more concerned about capital structure decisions than small firms.…”

Section: Determinants Of Target Leveragecontrasting

confidence: 64%

“…Using panel data, Banjeree, Heshmati, and Wihlborg (2000) and Lööf (2002) apply nonlinear least square to estimate the parameters in equation (5). However, this will generally lead to biased and inconsistent estimators because the error term may be cor-6 According to Lööf (2002), overadjustment may reflect unanticipated changes in economic conditions.…”

Section: A Dynamic Capital Structure Modelmentioning

confidence: 99%

“…We therefore expect a positive relationship between SIZE and the speed of adjustment. Banjeree, Heshmati, and Wihlborg (2000) and Lööf (2003) argue that in addition to firm-specific fa ctors some economy-wide factors should have an impact on the speed of adjustment. They include time-dummy variables to capture these effects in a simplistic way.…”

Section: Firm Size (Size)mentioning

confidence: 99%

“…Banerjee, Heshmati, and Wihlborg (2000) were the first to simultaneously endogenize the adjustment factor and the target leverage ratio. In addi-4 tion to identifying the determinants of optimal capital structure, their setup allows them to estimate the speed of adjustment towards the target capital structure and to identify the determinants of the speed of adjustment.…”

Section: Introductionmentioning

confidence: 99%

“…In addition, these firms adjust faster towards the optimal capital structure compared to the debt dependent Swedish companies. Using similar variables to model the speed of adjustment as Banerjee, Heshmati, and Wihlborg (2000), he finds that the estimate for the distance variable is significantly negative for UK firms, indicating that it is less costly to adjust by relatively small amounts.…”

Section: Introductionmentioning

confidence: 99%

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe use a dynamic adjustment model and panel methodology to investigate the determinants of a time-varying optimal capital structure. Because firms may temporarily deviate from their optimal capital structure in the presence of adjustment costs, we also endogenize the adjustment process. In partic ular, we ana lyze the effects of firm-specific characteristics as well as macroeconomic factors on the speed of adjustment to the target leverage. Our sample comprises a panel of 90 Swiss firms over the years 1991 to 2001. We find that faster growing firms and those that are further away from their optimal capital structure adjust more readily. Our results also reveal interesting interrelations between the adjustment speed and popular business cycle variables. For example, the speed of adjustment is higher when the term spread is higher, i.e., when economic prospects are good.

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Section: Determinants Of Target Leveragecontrasting

confidence: 64%

Section: A Dynamic Capital Structure Modelmentioning

confidence: 99%