Capital Structure Policies in Europe: Survey Evidence

Dirk Brounen, Abe de Jong and Kees Koedijk

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: In this paper we present the results of an international survey among 313 CFOs on capital structure choice. We document several interesting insights on how theoretical concepts are being applied by professionals in the U.K., the Netherlands, Germany, and France and we directly compare our results with previous findings from the U.S. Our results emphasize the presence of pecking-order behavior. At the same time this behavior is not driven by asymmetric information considerations. The static trade-off theory is confirmed by the importance of a target debt ratio in general, but also specifically by tax effects and bankruptcy costs. Overall, we find remarkably low disparities across countries, despite the presence of significant institutional differences. We find that private firms differ in many respects from publicly listed firms, e.g. listed firms use their stock price for the timing of new issues. Finally, we do not find substantial evidence that agency problems are important in capital structure choice.

Keywords: capital structure; debt maturity; equity issues; financial economics; international economics (search for similar items in EconPapers)
JEL-codes: G3 G32 L15 M O32 (search for similar items in EconPapers)
Date: 2005-02-01
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Citations: View citations in EconPapers (6)

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