Empirical evidence on determinants of capital structure

2004 ◽  
pp. 143-159 ◽  
Author(s):  
Tomas Jandik ◽  
Anil K. Makhija
Keyword(s):  
Capital Structure ◽  
Empirical Evidence

scholarly journals Corporate Governance Quality and Capital Structure Decisions: Empirical Evidence from Canada

2019 ◽  
Vol 6 (9) ◽  
pp. 303-311
Author(s):  
Dan Lin ◽  
Lu Lin
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Empirical Evidence ◽  
Composite Index ◽  
Free Cash Flow ◽  
Debt Financing ◽  
Cost Of Debt ◽  
Financing Decisions ◽  
Governance Quality ◽  
Corporate Governance Quality

This study examines the relationship between corporate governance quality and capital structure of firms listed on the S&P/TSX composite index between 2009 and 2012. Using an aggregate corporate governance index, this study finds support for the outcome hypothesis, which argues that capital structure is an “outcome” of corporate governance quality. Governance quality is found to be positively associated with firms’ leverage. Firms with lower governance quality have lower leverage as these firms’ managers do not like to have only little free cash flow leftover or have extra constraints imposed by debt financing. In contrast, firms with higher governance quality are more leveraged because these firms have lower agency costs and thus lower cost of debt financing. As a result, they can take on more debts. The empirical evidence from this study illuminates important links between governance quality and financing decisions of firms.

The Speed of Adjustment to the Target Market Value Leverage Is Slower Than You Think

2019 ◽  
Vol 55 (6) ◽  
pp. 1946-1977 ◽  
Author(s):  
Qie Ellie Yin ◽  
Jay R. Ritter
Keyword(s):  
Capital Structure ◽  
Empirical Evidence ◽  
Stock Price ◽  
Market Value ◽  
Target Market ◽  
Price Changes ◽  
Trade Off ◽  
Price Fluctuations ◽  
Speed Of Adjustment ◽  
The Capital Structure

In the capital structure literature, speed of adjustment (SOA) estimates are similar whether book or market leverage is used. This robustness is suspect, given the survey evidence that firms target their book leverage and the empirical evidence that they don’t issue securities to offset market leverage changes caused by stock price changes. We show that existing market SOA estimates are substantially upward biased due to the passive influence of stock price fluctuations. Controlling for this bias, the SOA estimate is 16% for book leverage and 10% for market leverage, implying that the trade-off theory is less important than previously thought.

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