Target Capital Structure Determinants and Speed of Adjustment Analysis to Address the Keynes-Hayek Debate

André Getzmann, Sebastian Lang and Klaus Spremann ()
Additional contact information
Klaus Spremann: University of St. Gallen, School of Finance, Bodanstrasse 6, 9000 St. Gallen and Swiss Institute of Banking and Finance, Rosenbergstrasse 52, 9000 St. Gallen, Switzerland

Journal of Reviews on Global Economics, 2015, vol. 4, 225-241

Abstract: According to F. A. Hayek, Keynes’ General Theory neglects an analysis of the production structure. As a contribution to this research gap, we look at companies’ decisions to finance investments and at their agility to adjust their capital structure. We thus study the relationship between capital structure to finance corporate production and shifts in aggregate demand. Target capital structure determinants and speeds of adjustment to these target capital structures will be analyzed for a geographically comprehensive sample of 2,706 companies listed in Asia, Europe and the U.S.A. in the period 1995 – 2009. Aggregate demand turns out to be the coordinating force which determines managers’ choices of target capital structures. The speed of adjustments towards target capital structures indicate that firms are agile in adapting to their targets. Our results provide evidence on Keynes’ General Theory from a firm level perspective: Firms respond quickly to shifts in aggregate demand by adjusting capital and production structure correspondingly

Keywords: Keynes; Hayek; capital structure; dynamic adjustment; panel models (search for similar items in EconPapers)
JEL-codes: E12 E22 E23 F36 G32 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.lifescienceglobal.com/independent-journ ... -keynes-hayek-debate (text/html)

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:lif:jrgelg:v:4:y:2015:p:225-241

Access Statistics for this article

Journal of Reviews on Global Economics is currently edited by Michael McAleer and Chia-Lin Chang

More articles in Journal of Reviews on Global Economics from Lifescience Global
Bibliographic data for series maintained by Faisal Ameer Khan ( this e-mail address is bad, please contact ).