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Dynamic optimal capital structure and technical change

  • Loof, Hans

The importance of capital structure is explored by comparing existing archetypes of financial systems through a new methodological application. Differences in firms’ cost of capital show that capital structure is relevant in R&D and other investment decisions. The conclusions are that 1) there are large and also unexpected cross-country differences in determinants to optimal capital structure; 2) observed leverage is often different from target in both equity (or stock market based) and debt (or bank based) dominated systems; 3) faster speed towards the target is observed in the equity based system indicating a higher flexibility.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 15 (2004)
Issue (Month): 4 (December)
Pages: 449-468

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Handle: RePEc:eee:streco:v:15:y:2004:i:4:p:449-468
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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