Advanced Search
MyIDEAS: Login

The dynamic adjustment towards target capital structures of firms in transition economies

Contents:

Author Info

  • Ralph de Haas

    ()
    (European Bank of Reconstruction and Development)

  • Marga Peeters

    (De Nederlaandsche Bank)

Abstract

This paper studies the capital structure dynamics of central and eastern European firms to better understand the quantitative and qualitative development of financial systems in this region. The dynamic model used endogenises the target leverage as well as the adjustment speed towards these targets. It is applied to microeconomic data for 10 countries. We find that during the transition process firms generally increased their leverage, lowering the gap between actual and target leverage. Profitability and age of firms are the most robust determinants of their capital structure targets. Older firms attract more bank debt, whereas profitability decreases firms’ leverage targets. While banking system development has in general enabled firms to get closer to their leverage targets, information asymmetries between firms and banks are still important. As a result, firms prefer internal finance above bank debt (pecking order behaviour) and adjust leverage only slowly.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ebrd.com/downloads/research/economics/workingpapers/wp0087.pdf
Download Restriction: no

Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 87.

as in new window
Length: 34 pages
Date of creation: Jul 2004
Date of revision:
Publication status: Published in De Haas, R.T.A. and H.M.M. Peeters (2006), The dynamic adjustment towards target capital structures of firms in transition economies, Economics of Transition,14(1), 133-169.
Handle: RePEc:ebd:wpaper:87

Contact details of provider:
Postal: One Exchange Square, London EC2A 2JN
Web page: http://www.ebrd.com/pages/research/publications/workingpapers.shtml
More information through EDIRC

Related research

Keywords: capital structure dynamics; transition economies; financial system development;

Other versions of this item:

Find related papers by JEL classification:

References

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

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Karin Joeveer, 2006. "Sources of Capital Structure: Evidence from Transition Countries," CERGE-EI Working Papers wp306, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Coricelli, Fabrizio & Driffield, Nigel & Pal, Sarmistha & Roland, Isabelle, 2010. "Excess Leverage and Productivity Growth in Emerging Economies: Is There A Threshold Effect?," IZA Discussion Papers 4834, Institute for the Study of Labor (IZA).
  3. Jõeveer, Karin, 2013. "Firm, country and macroeconomic determinants of capital structure: Evidence from transition economies," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 294-308.
  4. Fungácová , Zuzana & Kochanova, Anna & Weill, Laurent, 2014. "Does money buy credit? Firm-level evidence on bribery and bank debt," BOFIT Discussion Papers 4/2014, Bank of Finland, Institute for Economies in Transition.
  5. Mari Avarmaa & Aaro Hazak & Kadri Männasoo, 2011. "Capital structure formation in multinational and local companies in the Baltic States," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 11(1), pages 125-146, July.
  6. Ludwig Reinhard & Steven Li, 2010. "A note on capital structure target adjustment – Indonesian evidence," International Journal of Managerial Finance, Emerald Group Publishing, vol. 6(3), pages 245-259, July.
  7. Morar Triandafil, Cristina & Poanta, Dorina, 2011. "Central and East European Corporate Finance: Between Commonality and Heterogeneity," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 132-161, September.
  8. Fabrizio Coricelli & Nigel Driffield & Sarmistha Pal & Isabelle Roland, 2010. "Microeconomic implications of credit booms: evidence from emerging Europe," Working Papers 119, European Bank for Reconstruction and Development, Office of the Chief Economist.
  9. Bokusheva, Raushan & Bezlepkina, Irina V. & Kupavych, Alexander, 2007. "Studying Investment Patterns In Russian Agriculture," 104th Seminar, September 5-8, 2007, Budapest, Hungary 7803, European Association of Agricultural Economists.
  10. Hackbarth, Dirk & Miao, Jianjun & Morellec, Erwan, 2006. "Capital structure, credit risk, and macroeconomic conditions," Journal of Financial Economics, Elsevier, vol. 82(3), pages 519-550, December.
  11. Simonovska, Ana & Gjosevski, Dragan & Campos, Monica, 2012. "Capital Structure And Financial Performance Of Agricultural Companies – Evidences From The Macedonian Agricultural Sector In Transition," 132nd Seminar, October 25-27, 2012, Skopje, Republic of Macedonia 139501, European Association of Agricultural Economists.
  12. Hake, Mariya, 2012. "Banking Sector Concentration and Firm Indebtedness: Evidence from Central and Eastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3.
  13. Anastasiya Shamshur, 2009. "Is the Stability of Leverage Ratios Determined by the Stability of the Economy?," CERGE-EI Working Papers wp393, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  14. Nakhoda, Aadil, 2012. "The influence of financial leverage of firms on their international trading activities," MPRA Paper 35765, University Library of Munich, Germany.
  15. Zinych, Nataliya & Odening, Martin, 2009. "How Costly are (Agricultural) Investments during Economic Transition? A Critical Literature Appraisal," 2009 Conference, August 16-22, 2009, Beijing, China 50319, International Association of Agricultural Economists.

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:ebd:wpaper:87. 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: (Olga Lucas).

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.