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The capital structure of Swiss companies: an empirical analysis using dynamic panel data

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  • Philippe Gaud

    (HEC-University of Geneva)

  • Elion Jani

    (HEC-University of Geneva)

  • Martin Hoesli

    (HEC-University of Geneva, FAME and University of Aberdeen Business School)

  • André Bender

    (HEC-University of Geneva and FAME)

Abstract

In this paper, we analyze the determinants of the capital structure for a panel of 106 Swiss companies listed in the Swiss stock exchange. Both static and dynamic tests are performed for the period 1991-2000. It is found that the size of companies, the importance of tangible assets and business risk are positively related to leverage, while growth and profitability are negatively associated with leverage. The sign of these relations suggest that both the pecking order theory and trade off hypothesis are at work in explaining the capital structure of Swiss companies, although more evidence exists to validate the latter theory. Our analysis also shows that Swiss firms adjust toward a target debt ratio, but the adjustment process is much slower than in most other countries. It is argued that reasons for this can be found in the inst itutional context.

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Bibliographic Info

Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp68.

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Date of creation: Jan 2003
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Handle: RePEc:fam:rpseri:rp68

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Related research

Keywords: Capital structure; dynamic panel data; trade-off theory; pecking order theory;

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Cited by:
  1. Chakraborty, Indrani, 2010. "Capital structure in an emerging stock market: The case of India," Research in International Business and Finance, Elsevier, vol. 24(3), pages 295-314, September.
  2. González, Víctor M. & González, Francisco, 2014. "Banking liberalization and firms' debt structure: International evidence," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 466-482.
  3. Maria Psillaki & Nikolaos Daskalakis, 2009. "Are the determinants of capital structure country or firm specific?," Small Business Economics, Springer, vol. 33(3), pages 319-333, October.
  4. Irena Jindrichovska & Erginbay Ugurlu & Dana Kubickova, 2013. "Changes in Capital Structure of Czech SMEs: A Dynamic Panel Data Approach," Ekonomika a Management, University of Economics, Prague, vol. 2013(3), pages 6-26.
  5. 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.
  6. Serrasqueiro, Zélia & Nunes, Paulo Maçãs, 2010. "Non-linear relationships between growth opportunities and debt: Evidence from quoted Portuguese companies," Journal of Business Research, Elsevier, vol. 63(8), pages 870-878, August.
  7. Akdal, Sinan, 2010. "How do Firm Characteristics Affect Capital Structure? Some UK Evidence," MPRA Paper 29199, University Library of Munich, Germany.
  8. Wolfgang Drobetz & Gabrielle Wanzenried, 2006. "What determines the speed of adjustment to the target capital structure?," Applied Financial Economics, Taylor & Francis Journals, vol. 16(13), pages 941-958.
  9. Wolfgang Drobetz & Gabrielle Wanzenried, 2004. "What Determines the Speed of Adjustment to the Target Capital Structure?," Diskussionsschriften dp0415, Universitaet Bern, Departement Volkswirtschaft.
  10. 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.
  11. Kinga Mazur, 2007. "The Determinants of Capital Structure Choice: Evidence from Polish Companies," International Advances in Economic Research, Springer, vol. 13(4), pages 495-514, November.
  12. Maurizio La Rocca & Tiziana La Rocca & Alfio Cariola, 2011. "Capital Structure Decisions During a Firm's Life Cycle," Small Business Economics, Springer, vol. 37(1), pages 107-130, July.
  13. Paula Neto & António Brandão & António Cerqueira, 2009. "The Macroeconomic Determinants of Cross Border Mergers and Acquisitions and Greenfield Investments," GEE Papers 0017, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Aug 2009.
  14. Wolfgang Drobetz & Pascal Pensa & Claudia B. Wöhle, 2004. "Kapitalstrukturtheorie in Theorie und Praxis: Ergebnisse einer Fragebogenuntersuchung," Working papers 2004/09, Faculty of Business and Economics - University of Basel.
  15. Prasetyantoko, Agustinus, 2008. "Financing Policies and Firm Vulnerability in Indonesia," MPRA Paper 6533, University Library of Munich, Germany.
  16. Cziráki, Péter, 2007. "A tőkestruktúra empirikus vizsgálata a magyar és az osztrák tőzsdén jegyzett vállalatok körében
    [An empirical investigation of the capital structure of Austrian and Hungarian listed compa
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 703-715.
  17. González, Vi­ctor M. & González, Francisco, 2008. "Influence of bank concentration and institutions on capital structure: New international evidence," Journal of Corporate Finance, Elsevier, vol. 14(4), pages 363-375, September.
  18. Sze Kim Chin & Nur Adiana Hiau Abdullah, 2013. "Announcements Effect of Corporate Bond Issuance and Its Determinants," Contemporary Economics, University of Finance and Management in Warsaw, vol. 7(1), March.
  19. tiwari, aviral kumar & krishnankutty, Raveesh, 2010. "Determinants of capital Structure: comparison of empirical evidence for the use of different estimators," MPRA Paper 48612, University Library of Munich, Germany.
  20. Nigel Driffield & Vidya Mahambare & Sarmistha Pal, 2004. "Dynamic Adjustment of Corporate Leverage: Is there a lesson to learn from the Recent Asian Crisis?," Finance 0405007, EconWPA.
  21. Khaled Ba-Abbad & Nurwati Ashikkin Ahmad-Zaluki, 2012. "The Determinants of Capital Structure of Qatari Listed Companies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(2), pages 93-108, April.

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