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Financing Behavior of Romanian Listed Firms in Adjusting to the Target Capital Structure

Author

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  • Gabriela Brendea

    (Babeº-Bolyai University, Cluj-Napoca, Romania)

Abstract

This study investigates financing behavior in adjusting to the target capital structure of Romanian firms listed on the Bucharest Stock Exchange during the period 2004–2011. Using a dynamic panel data model and Arrelano’s and Bond’s Generalized Method of Moments (GMM), we estimate the size of the adjustment speed to the target capital structure of Romanian listed firms and investigate which of the determinants of the target capital structure explain the financing behavior of these firms. The results show that the size of the adjustment speed is quite high for Romanian firms, indicating that their deviation from the target capital structure is costly. In addition, we found that profitability and the firms’ size and asset tangibility are the most important determinants of the target capital structure and that the ownership structure has no significant effect on the target capital structure of Romanian firms. The theoretical and practical implications of these findings are discussed.

Suggested Citation

  • Gabriela Brendea, 2014. "Financing Behavior of Romanian Listed Firms in Adjusting to the Target Capital Structure," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(4), pages 312-329, September.
  • Handle: RePEc:fau:fauart:v:64:y:2014:i:4:p:312-329
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    References listed on IDEAS

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    Cited by:

    1. Sorin Gabriel ANTON, 2016. "The Impact Of Leverage On Firm Growth. Empirical Evidence From Romanian Listed Firms," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 147-158, December.
    2. Elena Alexandra Nenu & Georgeta Vintilă & Ştefan Cristian Gherghina, 2018. "The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies," IJFS, MDPI, vol. 6(2), pages 1-29, April.
    3. Vasile ILIE & Florina-Adriana STANICA & Nicoleta BARBUTA-MISU, 2019. "The Determinants of the Financing Decision of Listed Companies on the Bucharest Stock Exchange," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 48-62.

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    More about this item

    Keywords

    target capital structure; adjustment speed; dynamic panel data; Generalized Method of Moments;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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