 Targeting behavior and capital structure theories: An empirical analysis of gulf cooperation council countriesK. Sunitha Journal of Behavioral and Experimental Finance, 2024, vol. 43, issue C Abstract: This study examined the dynamic nature of capital structure decisions and the effectiveness of trade-off, pecking order, and market timing theories in explaining the changes in leverage ratios. A partial adjustment model was used to examine the practice of setting a target (optimal) leverage, estimate firms’ speeds of adjustment in reaching their target leverages, and identify the capital structure theories that best explain the changes in leverage levels of firms in the Gulf Cooperation Council countries. Firms in these countries reach their target leverages at estimated average speeds of adjustment of 59.8 %–72 % annually. These speeds of adjustment are sensitive to country- and firm-specific characteristics. The targeting behavior factor of the trade-off theory better explains the changes in capital structure compared with the pecking order or market timing theories. Keywords: Adjustment speed of leverage; Capital structure theories; Targeting behavior; Target leverage (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:43:y:2024:i:c:s2214635024000595 DOI: 10.1016/j.jbef.2024.100944 Access Statistics for this article Journal of Behavioral and Experimental Finance is currently edited by Michael Dowling and Jürgen Huber More articles in Journal of Behavioral and Experimental Finance from Elsevier |
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