Has the past really passed? Strategic inertia and capital structure persistence

Zhen Huang and Weiwei Gao

Managerial and Decision Economics, 2022, vol. 43, issue 4, 883-893

Abstract: Capital structure persistence is an important phenomenon in corporate finance, but we still know little about how strategic inertia influences firms' capital structure persistence. Using a sample of Chinese listed firms during 2004–2016, our results show that strategic inertia can facilitate the persistence of capital structure and confirm its information asymmetry channel. We also find that this effect is more pronounced when CEOs are without a financial background and CEOs have low ownership or long tenure, suggesting that the impact of strategic inertia on capital structure persistence depends on the CEO's financial background, tenure, and ownership characteristics. In addition, the effect of strategic inertia on capital structure persistence mainly exists in state‐owned firms rather than privately owned firms.

Date: 2022
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https://doi.org/10.1002/mde.3424

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:43:y:2022:i:4:p:883-893

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