Dynamic optimal capital structure and technical change

Abstract

The importance of capital structure is explored by comparing existing archetypes of financial systems through a new methodological application. Differences in firms’ cost of capital show that capital structure is relevant in RD 2) observed leverage is often different from target in both equity (or stock market based) and debt (or bank based) dominated systems; 3) faster speed towards the target is observed in the equity based system indicating a higher flexibility.