Dynamic Optimal Capital Structure and Technical Change

Hans Lööf ()

No 23, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

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 R&D and other investment decisions. The conclusions are that 1) there are large and also unexpected cross-country differences in determinants to optimal capital structure; 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.

Keywords: Capital structure; dynamic adjustment; panel data; optimal leverage; financial markets; cross-country comparison; technological change; creative destruction. (search for similar items in EconPapers)
JEL-codes: C23 C51 G32 O16 O31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2004-12-09
New Economics Papers: this item is included in nep-cfn, nep-dev and nep-ino
Note: The paper is published in Structural Change and Economic Dynamics, Vol 15 Issue 14, pages 449-468 (December 2004)
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Citations: View citations in EconPapers (18)

Published in Structural Change and Economic Dynamics, 2004, pages 449-468.

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Journal Article: Dynamic optimal capital structure and technical change (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0023

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