Abstract
AbstractWe investigate the capital structure and the dynamic behaviour of firms' debt ratios in a large sample of companies from 52 countries. Our findings support a complex view of capital structure decisions, with firm, macroeconomic and institutional factors interacting in the determination of both the optimal leverage and the adjustment process towards it. This results in a complex non‐linear dynamic behaviour of firms' debt‐to‐equity ratios. These interactions contribute for almost two thirds of the explained heterogeneity of the target leverage, and around one third of the speed of adjustment towards the optimal capital structure. Overall, our results suggest that market timing and pecking order arguments prevail in the short run, while a dynamic trade‐off mechanism with costly readjustment matters mainly in the long run.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
