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Capital structure of listed Portuguese companies: Determinants of debt adjustment


  • Zélia Maria Silva Serrasqueiro
  • Márcia Cristina Rêgo Rogão


Purpose - This study aims to evaluate the impact of listed Portuguese companies' specific determinants on adjustment of actual debt towards target debt ratio. The specific determinants on adjustment of actual debt towards target debt ratio that we consider are: asset tangibility, size, profitability and market to book ratio. Design/methodology/approach - Dynamic panel estimators are used to determine adjustment of the actual level of debt towards optimal level of debt, revealing the level of transaction costs borne by companies. OLS regressions are also used, in order to estimate the impacts of companies' specific determinants on debt adjustment. Findings - The results suggest that transaction costs are relevant in listed Portuguese companies' access to debt. Tangibility of assets and size are determinants that contribute for a greater adjustment of debt towards optimal level. The results also suggest that the capital structure decisions of listed Portuguese companies can be explained in the light of trade-off and pecking order theories, and not according to what is forecast by market timing theory. Originality/value - Through this study, the level of adjustment of actual debt towards target debt ratio in the context of companies belonging to under-developed capital markets are determined, in the particular case of this study, belonging to the Portuguese capital market. Furthermore, from target debt ratio depending on companies' specific determinants, the explanatory power of trade-off, pecking order and market timing theories are investigated. The results contribute for a deeper understanding about companies' capital structure decisions.

Suggested Citation

  • Zélia Maria Silva Serrasqueiro & Márcia Cristina Rêgo Rogão, 2009. "Capital structure of listed Portuguese companies: Determinants of debt adjustment," Review of Accounting and Finance, Emerald Group Publishing, vol. 8(1), pages 54-75, February.
  • Handle: RePEc:eme:rafpps:v:8:y:2009:i:1:p:54-75

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    Cited by:

    1. Stavros H. Arvanitis & Irakleia S. Tzigkounaki & Theodoros V. Stamatopoulos & Eleftherios I. Thalassinos, 2012. "Dynamic Approach of Capital Structure of European Shipping Companies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 5(3), pages 33-63, December.
    2. Bartholdy, Jan & Mateus, Cesário, 2011. "Debt and taxes for private firms," International Review of Financial Analysis, Elsevier, vol. 20(3), pages 177-189, June.
    3. Mazlina Mustapha Author_Email: & Hashanah Bt Ismail & Badriyah Bt Minai, 2011. "Determinants Of Debt Structure: Empirical Evidence From Malaysia," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-490, Conference Master Resources.
    4. Chen, Dar-Hsin & Chen, Chun-Da & Chen, Jianguo & Huang, Yu-Fang, 2013. "Panel data analyses of the pecking order theory and the market timing theory of capital structure in Taiwan," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 1-13.
    5. Nadeem Ahmed Sheikh & Zongjun Wang, 2011. "Determinants of capital structure: An empirical study of firms in manufacturing industry of Pakistan," Managerial Finance, Emerald Group Publishing, vol. 37(2), pages 117-133, January.

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    Portugal; Debts; Companies; Cost estimates;


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