How Capital Structure Adjusts Dynamically during Financial Crisis

Shamsher M., Mohamed Ariff () and Taufiq H
Additional contact information
Shamsher M.: University Putra Malaysia
Taufiq H: University Putra Malaysia
Authors registered in the RePEc Author Service: Shamsher Mohamad

No CARF-F-130, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: The availability of a unique data set of financially distressed firms enabled this study to apply the dynamic capital structure adjustment model to a study of capital structure. In addition, the factors driving capital structure adjustment of financially distressed and of healthy firms were estimated. The results identified 13 significant variables, which included many macroeconomic variables previously not studied, thus evidence is produced of the impact of macroeconomic factors on capital structure for the first time. We also estimated the adjustment parameters using a new dynamic adjustment model applied to an unbalanced panel data set of distressed and healthy firms. It is found that the adjustment parameters are different in the short term and long term. These new findings add to the capital structure literature.

Pages: 35 pages
Date: 2008-08
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Citations: View citations in EconPapers (9)

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