What Drives Capital Structure? Evidence from Chilean Panel Data
There is an extensive literature on the determinants of capital structure for developed countries, but little has been said about emerging economies. This article analyzes the driving forces of capital structure in Chile for the period 1990-2002. We study aggregate leverage and interest-bearing liabilities in isolation for all firms, and firms segmented by economic sector. Our results give more support to the trade-off theory than to the pecking-order hypothesis. In particular, in recent years equity issues have followed firms’ financing deficits more closely than net debt issues have. We conjecture that tax and monetary policies might have driven this result. The contribution of our work is also methodological. Our econometric specification is based on a random-effects panel data model for censored data developed by Anderson (1986) and extended by Kim and Maddala (1992). We expand Anderson-Kim-Maddala’s work to panel data models for uncensored data, and devise specification tests for non-nested random-effects models. Most literature on capital structure focuses on the cross-section variation of the data by averaging observations over time. Or, when using panel data models, the bias of fixed-effects estimates, under a dynamic specification, is usually neglected.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- G. S. Maddala, 1987. "Limited Dependent Variable Models Using Panel Data," Journal of Human Resources, University of Wisconsin Press, vol. 22(3), pages 307-338.
- Russell Davidson & James G. MacKinnon, 1980.
"Several Tests for Model Specification in the Presence of Alternative Hypotheses,"
378, Queen's University, Department of Economics.
- Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May.
- Graham, John R., 1996. "Debt and the marginal tax rate," Journal of Financial Economics, Elsevier, vol. 41(1), pages 41-73, May.
- Bradley, Michael & Jarrell, Gregg A & Kim, E Han, 1984. " On the Existence of an Optimal Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, vol. 39(3), pages 857-78, July.
- Pesaran, M H, 1974. "On the General Problem of Model Selection," Review of Economic Studies, Wiley Blackwell, vol. 41(2), pages 153-71, April.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
- Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
- Petersen, Mitchell A & Rajan, Raghuram G, 1995.
"The Effect of Credit Market Competition on Lending Relationships,"
The Quarterly Journal of Economics,
MIT Press, vol. 110(2), pages 407-43, May.
- Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
- Jeffrey H. Nilsen, 1999.
"Trade Credit and the Bank Lending Channel,"
99.04, Swiss National Bank, Study Center Gerzensee.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
- Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
- Booth, L. & Asli Demirgu-Kunt, V.A. & Maksimovic, V., 1999.
"Capital Structure in Developing Countries,"
Rotman School of Management - Finance
00-001, Rotman School of Management, University of Toronto.
- Eugene F. Fama & Kenneth R. French, .
"Testing Tradeoff and Pecking Order Predictions about Dividends and Debt.”,"
CRSP working papers
506, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Eugene F. Fama, 2002. "Testing Trade-Off and Pecking Order Predictions About Dividends and Debt," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 1-33, March.
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- William Greene, 1998.
"Marginal Effects in the Censored Regression Model,"
98-05, New York University, Leonard N. Stern School of Business, Department of Economics.
- Raghuram G. Rajan & Luigi Zingales, 1994.
"What Do We Know About Capital Structure? Some Evidence from International Data,"
NBER Working Papers
4875, National Bureau of Economic Research, Inc.
- Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
- Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
- Scott, James H, Jr, 1977. "Bankruptcy, Secured Debt, and Optimal Capital Structure," Journal of Finance, American Finance Association, vol. 32(1), pages 1-19, March.
- Frank, Murray Z. & Goyal, Vidhan K., 2003. "Testing the pecking order theory of capital structure," Journal of Financial Economics, Elsevier, vol. 67(2), pages 217-248, February.
- Chirinko, Robert S. & Singha, Anuja R., 2000. "Testing static tradeoff against pecking order models of capital structure: a critical comment," Journal of Financial Economics, Elsevier, vol. 58(3), pages 417-425, December.
- de Miguel, Alberto & Pindado, Julio, 2001. "Determinants of capital structure: new evidence from Spanish panel data," Journal of Corporate Finance, Elsevier, vol. 7(1), pages 77-99, March.
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
- Shyam-Sunder, Lakshmi & C. Myers, Stewart, 1999. "Testing static tradeoff against pecking order models of capital structure," Journal of Financial Economics, Elsevier, vol. 51(2), pages 219-244, February.
- Wald, John K, 1999. "How Firm Characteristics Affect Capital Structure: An International Comparison," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(2), pages 161-87, Summer.
- Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
When requesting a correction, please mention this item's handle: RePEc:edj:ceauch:200. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.