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Dynamic Capital Structure: Evidence From The Small Developing Country Of Jordan

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  • Aktham Maghyereh

Abstract

his paper examines the determinants of the target capital structure of Jordanian manufacturing firms and the adjustment process towards this target. The study extends the empirical work on capital structure in two ways. First, it uses a dynamic model which sheds light on the dynamic nature of the capital structure adjustment process by firms. Second, the study employs a panel data analysis and GMM estimation techniques that control for unobserved firm-specific effects and the endogeneity problem. The findings of the paper suggest that Jordanian firms have target leverage ratios and they adjust to them relatively fast. Consistent with the predictions of capital structure theories, and the findings of the empirical literature, the results of this paper suggest that size, tangibility, profitability, growth opportunity, and earnings volatility exert significant effects on the capital structure choice of Jordanian firms.

Suggested Citation

  • Aktham Maghyereh, 2005. "Dynamic Capital Structure: Evidence From The Small Developing Country Of Jordan," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 13(1), pages 1-32, June.
  • Handle: RePEc:ije:journl:v:13:y:2005:i:1:p:1-32
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    File URL: http://www.iium.edu.my/enmjournal/131art1.pdf
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    References listed on IDEAS

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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. repec:rss:jnljef:v4i6p6 is not listed on IDEAS
    3. Siti Nur Aqilah Ab Wahab & Nur Ainna Ramli, 2014. "The Determinants of Capital Structure: An Empirical Investigation of Malaysian Listed Government Linked Companies," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 930-945.

    More about this item

    Keywords

    Dynamic capital structure; Asset tangibility; GMM estimation;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • 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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