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Adjustment speed of capital structure: A literature survey of empirical research

Adjustment speed of capital structure: A literature survey of empirical research We synthesize empirical studies on the determinants of the heterogeneity in the adjustment speed (speed of adjustment; SOA) of capital structure. These determinants are categorized into six groups, namely, (1) firm-specific characteristics, (2) financial reporting and managerial incentives, (3) corporate governance, (4) informal institutions, (5) financial market attributes and (6) economy-wide attributes. From this analysis, we perceive important potential research questions linked to identifying channels associated with the costs and frictions explaining SOA heterogeneity, including financial reporting quality aspects, firm internal and external monitoring mechanisms and institutional and cultural elements. Interesting avenues for future research also include considering SOA dynamics for comparable cross-country samples and the investigation of the subsequent consequences of capital structure adjustments.JEL Classification: G30, G32, G34, M41 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Australian Journal of Management SAGE

Adjustment speed of capital structure: A literature survey of empirical research

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References (157)

Publisher
SAGE
Copyright
© The Author(s) 2023
ISSN
0312-8962
eISSN
1327-2020
DOI
10.1177/03128962231154744
Publisher site
See Article on Publisher Site

Abstract

We synthesize empirical studies on the determinants of the heterogeneity in the adjustment speed (speed of adjustment; SOA) of capital structure. These determinants are categorized into six groups, namely, (1) firm-specific characteristics, (2) financial reporting and managerial incentives, (3) corporate governance, (4) informal institutions, (5) financial market attributes and (6) economy-wide attributes. From this analysis, we perceive important potential research questions linked to identifying channels associated with the costs and frictions explaining SOA heterogeneity, including financial reporting quality aspects, firm internal and external monitoring mechanisms and institutional and cultural elements. Interesting avenues for future research also include considering SOA dynamics for comparable cross-country samples and the investigation of the subsequent consequences of capital structure adjustments.JEL Classification: G30, G32, G34, M41

Journal

Australian Journal of Management – SAGE

Published: Jan 1, 2023

Keywords: Capital structure dynamics; corporate governance; financial markets; financial reporting; informal institutions; speed of leverage adjustment

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