Advanced Search
MyIDEAS: Login to save this paper or follow this series

Firm Characteristics and Dynamic Capital Structure Adjustment

Contents:

Author Info

  • Wolfgang Drobetz
  • Pascal Pensa
  • Gabrielle Wanzenried

    (University of Basel)

Registered author(s):

    Abstract

    We use a dynamic framework and panel methodology to investigate the determinants of a time-varying corporate capital structure. Our sample comprises 706 European firms from France, Germany, Italy and the U.K. over the period from 1983 to 2002. If capital structure adjustment is costly, firms may deviate temporarily from their target debt ratios. Therefore, we investigate the adjustment process and analyze the impact of well-known firm characteristic variables on the speed of adjustment towards a endogenously specified target debt ratio. We find that larger and faster growing firms adjust their capital structure more readily. Furthermore, large deviations from target debt ratios lead to faster readjustment. Additionally, we shed new light on capital structure rebalancing arguments. We document that large swings in market values of leverage lead to readjustment in the corresponding book values of leverage in the following periods. Finally, we find that capital structure adjustments are largely determined by financial constraints, i.e., firms in unfavourable financial conditions show only little or no adjustment behavior at all.

    Download Info

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Bibliographic Info

    Paper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2006/10.

    as in new window
    Length:
    Date of creation: 2006
    Date of revision:
    Handle: RePEc:bsl:wpaper:2006/10

    Contact details of provider:
    Postal: Peter-Merian-Weg 6, Postfach, CH-4002 Basel
    Web page: http://wwz.unibas.ch
    More information through EDIRC

    Related research

    Keywords: Capital structure; dynamic analysis; panel data;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bsl:wpaper:2006/10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (WWZ).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.