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Firm size and capital structure: Evidence using dynamic panel data

Author

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  • Víctor M. González

    (Department of Business Administration - University of Oviedo)

  • Francisco González

    (Department of Business Administration - University of Oviedo)

Abstract

This paper suggests that the validity of the trade-off (TOT) and pecking-order (POT) theories to explain financing decisions varies among small, medium-sized and large firms. Using dynamic panel data tests on a sample of 3,439 Spanish firms over the period 1995-2003, results are partially consistent with both explanations but suggest a greater validity of pecking-order predictions for small firms. In small firms, the negative influence of profitability and the positive influence of investment opportunities and of intangible assets on firm debt predicted by the POT are heightened. However, no differences are observed between small and large firms in their speed of adjustment to the target leverage as suggested by the TOT.

Suggested Citation

  • Víctor M. González & Francisco González, 2011. "Firm size and capital structure: Evidence using dynamic panel data," Post-Print hal-00730234, HAL.
    • Handle: RePEc:hal:journl:hal-00730234
    DOI: 10.1080/00036846.2011.595690
    Note: View the original document on HAL open archive server: https://hal.science/hal-00730234
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    References listed on IDEAS

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    Cited by:

    1. Barnali Chaklader & Deepak Chawla, 2016. "A Study of Determinants of Capital Structure through Panel Data Analysis of Firms Listed in NSE CNX 500," Vision, , vol. 20(4), pages 267-277, December.

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