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The Capital Structure Choice and Financial Market Liberalization: A Panel Data Analysis and GMM Estimation in Jordan

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  • Maghyereh, A.
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    Abstract

    This paper examines the nature and determinants of the capital structure choice of Jordanian non-financial listed companies. This paper also studies the impact of the financial and economic liberalization on the capital structure choice of these companies. The move from a relatively highly controlled to a more liberalized financial system since the early-1990s should have a significant impact on the extent and nature of the financial decisions of companies. The findings of this paper suggest that while much of the explanatory powers of main stream capital structure theories are applicable to the Jordanian companies. The empirical evidence also shows that the 1990s liberalization did affect their financial decisions. Moreover, the findings of the paper suggest that Jordanian companies have target leverage ratios and following the financial liberalization, their speed of adjustment to these ratios have, as unexpected, decreased.

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    Bibliographic Info

    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 4 (2004)
    Issue (Month): 2 ()
    Pages:

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    Handle: RePEc:eaa:aeinde:v:4:y:2004:i:1_13

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    1. Singh, Ajit, 1994. "Corporate financial patterns in industrialising economies: a comparative international study," MPRA Paper 54936, University Library of Munich, Germany.
    2. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(2), pages 187-221, June.
    4. Booth, L. & Asli Demirgu-Kunt, V.A. & Maksimovic, V., 1999. "Capital Structure in Developing Countries," Rotman School of Management - Finance, Rotman School of Management, University of Toronto 00-001, Rotman School of Management, University of Toronto.
    5. Bradley, Michael & Jarrell, Gregg A & Kim, E Han, 1984. " On the Existence of an Optimal Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, American Finance Association, vol. 39(3), pages 857-78, July.
    6. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, American Finance Association, vol. 50(5), pages 1421-60, December.
    7. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, American Finance Association, vol. 46(1), pages 297-355, March.
    8. Marsh, Paul, 1982. " The Choice between Equity and Debt: An Empirical Study," Journal of Finance, American Finance Association, American Finance Association, vol. 37(1), pages 121-44, March.
    9. Singh, A. & Hamid, J., 1992. "Corporate Financial Structure in Developing Countries," Papers, World Bank - International Finance Corporation 1, World Bank - International Finance Corporation.
    10. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(2), pages 147-175, November.
    11. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    12. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, American Finance Association, vol. 43(1), pages 1-19, March.
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