On the evolution of corporate capital structures

Daniel Arce, Douglas Cook and Robert Kieschnick ()

Journal of Evolutionary Economics, 2015, vol. 25, issue 3, 583 pages

Abstract: Most, if not all, published theoretical models of capital structure decisions assume that all firms follow the same capital structure decision process or strategy. We argue that such an assumption is inconsistent with extant evidence. Instead, we argue that there is heterogeneity in the decision processes and strategies that managers follow, and that they make adaptive adjustments to their strategies that are conditioned on the choices of other firms as well as their prior choices. Using data on U.S. corporate capital structures between 1965 and 2003, we find evidence that is consistent with our proposed alternative. Our characterization of the evolution of corporate capital structures emphasizes the roles of a firm’s initial capital structure and its competitors’ capital structure strategies. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Adaptive behavior; Heterogeneous agent types; Firm dynamics; Capital structure; Fractional variables; D20; G32 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s00191-015-0394-8

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