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Dynamic Capital Structure: the Case of Hufvudstaden

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  • Graflund, Andreas

    (Department of Economics, Lund University)

Abstract

This paper introduces a new approach of testing capital structure hypothesis on a firm specific level. Johansen’s procedure for cointegration testing is employed to test theories of optimal capital structure. The sample covers a firm with unique properties, Hufvudstaden, during the period 1938 until present. The approach of cointegration allows testing of long-run equilibrium between non-stationary time-series. We find empirical support that capital structure follow a dynamic equilibrium path. However, this equilibrium is more complex as posited by existing theories. The result is found for leverage measured as both book-value- and market-value-of-equity.

Suggested Citation

  • Graflund, Andreas, 2000. "Dynamic Capital Structure: the Case of Hufvudstaden," Working Papers 2000:20, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2000_020
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    References listed on IDEAS

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    More about this item

    Keywords

    capital structure; cointegration; dynamic capital structure;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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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