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Determinants of Capital Structure: Insights from Japanese Private Firms

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  • Naheed Rabbani

    (University of Dhaka)

Abstract

This study examines the capital structure of Japanese private firms. Using a dataset over a period of more than thirty years, the study shows that the leverage ratios of private firms remain stable over the long term and exhibit greater persistence than do those of public firms. Regression analysis shows that the firms’ future leverage ratios are significantly positively related to initial leverage ratios. Most of the variation in leverage ratios can be explained by unobservable factors. Private firms are found to have a significantly higher leverage ratio than public firms. Adjustment to the target leverage ratio is slower for private firms than for public firms, reflecting the high adjustment costs of the former.

Suggested Citation

  • Naheed Rabbani, 2020. "Determinants of Capital Structure: Insights from Japanese Private Firms," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 27(4), pages 587-603, December.
    • Handle: RePEc:kap:apfinm:v:27:y:2020:i:4:d:10.1007_s10690-020-09307-3
    DOI: 10.1007/s10690-020-09307-3
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    More about this item

    Keywords

    Capital structure; Leverage; Determinant; Stability; Japan;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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