The capital structure of Swiss companies: an empirical analysis using dynamic panel data

Philippe Gaud, Elion Jani, Martin Hoesli and André Bender
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Philippe Gaud: HEC-University of Geneva
Elion Jani: HEC-University of Geneva
André Bender: HEC-University of Geneva and FAME

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: In this paper, we analyze the determinants of the capital structure for a panel of 106 Swiss companies listed in the Swiss stock exchange. Both static and dynamic tests are performed for the period 1991-2000. It is found that the size of companies, the importance of tangible assets and business risk are positively related to leverage, while growth and profitability are negatively associated with leverage. The sign of these relations suggest that both the pecking order theory and trade off hypothesis are at work in explaining the capital structure of Swiss companies, although more evidence exists to validate the latter theory. Our analysis also shows that Swiss firms adjust toward a target debt ratio, but the adjustment process is much slower than in most other countries. It is argued that reasons for this can be found in the inst itutional context.

Keywords: Capital structure; dynamic panel data; trade-off theory; pecking order theory (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2003-01
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: The Capital Structure of Swiss Companies: an Empirical Analysis Using Dynamic Panel Data (2005)
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