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Empirical Evidence of Target Leverage, Adjustment Costs and Adjustment Speed of Non-Financial Firms in Selected African Countries

Author

Listed:
  • Oyebola Fatima Etudaiye-Muhtar

    (Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia,)

  • Oyebola Fatima Etudaiye-Muhtar

    (Faculty of Management Sciences,University of Ilorin, Ilorin, Nigeria,)

  • Rubi Ahmad

    (Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia.)

Abstract

The issue of target leverage for corporate firms in developing countries has received little attention in extant literature, especially countries in Africa. Given the imperfection that exists in African financial markets that may limit firms access to external capital, this study investigates dynamic adjustment towards a target debt ratio. In addition, the study used a dynamic panel data estimation technique to determine adjustment costs and speed of adjustment in non-financial firms in selected African countries over the period 2003-2012. The study finds that the firms make dynamic adjustment to a target leverage with low adjustment costs and relatively fast speed of adjustment.

Suggested Citation

  • Oyebola Fatima Etudaiye-Muhtar & Oyebola Fatima Etudaiye-Muhtar & Rubi Ahmad, 2015. "Empirical Evidence of Target Leverage, Adjustment Costs and Adjustment Speed of Non-Financial Firms in Selected African Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 482-488.
    • Handle: RePEc:eco:journ1:2015-02-20
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    Cited by:

    1. Rubi Ahmad & Oyebola Fatima Etudaiye-Muhtar, 2017. "Dynamic Model of Optimal Capital Structure: Evidence from Nigerian Listed Firms," Global Business Review, International Management Institute, vol. 18(3), pages 590-604, June.
    2. Strike Mbulawa & Nathan F. Okurut & Mogale Ntsosa & Narain Sinha, 2020. "Optimal Capital Structure and Speed of Adjustment under Hyperinflation and Dollarization," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 158-177, May.

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    More about this item

    Keywords

    Capital Structure; Target Leverage; Adjustment Costs;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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