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How Capital Structure Adjusts Dynamically during Financial Crisis

Author

Listed:
  • Shamsher M.

    (University Putra Malaysia)

  • M. Ariff

    (University of Tokyo & Bond University)

  • Taufiq H

    (University Putra Malaysia)

Abstract

The availability of a unique data set of financially distressed firms enabled this study to apply the dynamic capital structure adjustment model to a study of capital structure. In addition, the factors driving capital structure adjustment of financially distressed and of healthy firms were estimated. The results identified 13 significant variables, which included many macroeconomic variables previously not studied, thus evidence is produced of the impact of macroeconomic factors on capital structure for the first time. We also estimated the adjustment parameters using a new dynamic adjustment model applied to an unbalanced panel data set of distressed and healthy firms. It is found that the adjustment parameters are different in the short term and long term. These new findings add to the capital structure literature.

Suggested Citation

  • Shamsher M. & M. Ariff & Taufiq H, 2008. "How Capital Structure Adjusts Dynamically during Financial Crisis," CARF F-Series CARF-F-130, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf130
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    File URL: https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/134.pdf
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    Citations

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    Cited by:

    1. Barry Harrison & Theodorus Wisnu Widjaja, 2014. "The Determinants of Capital Structure: Comparison between Before and After Financial Crisis," Economic Issues Journal Articles, Economic Issues, vol. 19(2), pages 55-83, September.
    2. Muhammad Naveed, 2015. "Capital Structure Dynamics and Sensitivity Analysis: A Case of Developing Country?," Proceedings of International Academic Conferences 2603875, International Institute of Social and Economic Sciences.
    3. Athenia Bongani Sibindi, 2018. "Determinants of Bank Capital Structure: Evidence from South Africa," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(5), pages 108-126, OCTOBER.
    4. Yildirim, Ramazan & Masih, Mansur & Bacha, Obiyathulla Ismath, 2018. "Determinants of capital structure: evidence from Shari'ah compliant and non-compliant firms," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 198-219.
    5. Thao Nguyen & Min Bai & Greg Hou & Cameron Truong, 2021. "Speed of adjustment towards target leverage: evidence from a quantile regression analysis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5073-5109, December.
    6. Sandra M. Leitner & Robert Stehrer, 2012. "Access to Finance and Composition of Funding during the Crisis: A firm-level analysis for Latin American countries," wiiw Working Papers 78, The Vienna Institute for International Economic Studies, wiiw.
    7. Zeitun, Rami & Temimi, Akram & Mimouni, Karim, 2017. "Do financial crises alter the dynamics of corporate capital structure? Evidence from GCC countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 21-33.
    8. Dwi Risma Deviyanti & Herry Ramadhani & Yoremia Lestari Ginting & Yunita Fitria & Yanzil Azizil Yudaruddin & Rizky Yudaruddin, 2023. "A Global Analysis of the COVID-19 Pandemic and Capital Structure in the Consumer Goods Sector," JRFM, MDPI, vol. 16(11), pages 1-19, November.

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