Drivers of the Target Financial Leverage and Speed of Adjustment in Small and Medium-Sized Companies at Different Stages of Life Cycle

Mohammad Safari () and Zahra Kazemi Saraskanrood ()
Additional contact information
Mohammad Safari: Assistant Professor, Department of Business Management, Faculty of Economics and Administrative Sciences, University of Mazandaran, Mazandaran, Iran.
Zahra Kazemi Saraskanrood: PhD Student, Department of Business Management, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Mazandaran, Iran

European Journal of Studies in Management and Business, 2023, vol. 25, 16-31

Abstract: According to the results of recent studies, the main causes of companies’ failure are inadequate and inappropriate financing. Therefore, one of the key tasks of financial managers is to determine the best combination of the company's financial resources, or in other words, the target financial leverage. On the other hand, growth cycles are very useful for analyzing business cycles in countries that have experienced severe recessions and booms, such as Iran. The purpose of this study is to investigate the drivers of the target financial leverage and the speed of adjustment of financial leverage at different Stages of the life cycle. The statistical population is small and medium-sized companies active in Tehran Stock Exchange. For this purpose, 112 companies were selected by systematic elimination sampling method between 2015 to 2020 and Eviews 9 software was used. The results indicate that for firms in the growth and maturing stages of their lifecycle, profitability, firm size, and tangible assets are stronger positive drivers for target leverage and when the company One stage of the life cycle goes to the next, the company slows down its gap with the target lever, and the speed of adjusting the optimal structure is reduced.

Keywords: Target Leverage; Capital Structure; Life Cycle; Speed of Adjustment; Small and Medium Sized Companies (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://api.eurokd.com/Uploads/Article/546/mbrq.2023.25.02.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bco:mbrqaa::v:25:y:2023:p:16-31

DOI: 10.32038/mbrq.2023.25.02

Access Statistics for this article

European Journal of Studies in Management and Business is currently edited by Fernando Jose Garrigos Simon

More articles in European Journal of Studies in Management and Business from EUROKD
Bibliographic data for series maintained by Sara Gunen ().