Empirical Investigation of Symmetric and Asymmetric Target Adjustment Models: Capital Structure of Non-Financial Firms in Jordan

Bashar K. Abu Khalaf

International Journal of Economics and Finance, 2017, vol. 9, issue 3, 133-140

Abstract: The different capital structure theories propose the possible asymmetric behavior of capital structure. Thus, this paper empirically investigates whether non-financial Jordanian firms follow symmetrical or asymmetrical adjustment model. Then, an interaction model with the size and profitability (firm characteristics) investigated the impact of low/high profit and small/large size on the adjustment of leverage towards the target leverage ratio. This paper covered the period of 14 years (2002-2015) for a total of 110 companies listed on Amman Stock Exchange (75 industrial and 35 services). Results indicate that although Jordanian firms seek a target leverage ratio, their adjustment towards that target is Asymmetrical and high profitable and large companies tend to adjust faster than low profitable and small size companies.

Keywords: target capital structure; symmetric/asymmetric adjustment; size; profitability; ASE (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:9:y:2017:i:3:p:133-140

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