Is the Stability of Leverage Ratios Determined by the Stability of the Economy?
The choice of capital structure by firms is a fundamental issue in financial literature. According to a recent finding, the capital structure of firms remains almost unchanged during their lives meaning that leverage ratios are significantly stable over time. The stability of leverage ratios is mainly generated by an unobserved firm-specific effect that is liable for the majority of variation in capital structure (Lemmon, Roberts, and Zender 2008). However, the study focuses on the US economy, which is relatively stable. I study how substantial changes in the economy affect the stability of firms' capital structure in transition countries. Specifically, I concentrate on Central and Eastern European economies that passed through transition from central planning to a market economy and privatization, the Russian financial crisis, and EU membership. In addition, I investigate whether the ownership structure of firms is responsible for the part of the unexplained variation in leverage.
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- Jan Bena & Jan Hanousek, 2008.
"Rent Extraction by Large Shareholders: Evidence Using Dividend Policy in the Czech Republic,"
Czech Journal of Economics and Finance (Finance a uver),
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- Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2005. "Origin and Concentration: Corporate Ownership, Control and Performance," CERGE-EI Working Papers wp259, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
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- Karin Jõeveer, 2006. "Sources of capital structure : evidence from transition countries," Bank of Estonia Working Papers 2006-02, Bank of Estonia, revised 12 Nov 2006.
- Karin Joeveer, 2006. "Sources of Capital Structure: Evidence from Transition Countries," CERGE-EI Working Papers wp306, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
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