Dynamic adjustment towards target capital structure: Thailand evidence
By employing panel data, the present study examines the dynamic aspects of capital structure of 269 non-financial listed firms in Thailand from 2000 to 2009. This is a relatively new area in finance literature. The present study investigates the existence of target capital structure, speed of adj...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English English |
| Published: |
Universiti Kebangsaan Malaysia
2013
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/33932/ http://irep.iium.edu.my/33932/ http://irep.iium.edu.my/33932/1/dynamic_adjustment_towards_target_capital_structure_thailand_evidence.pdf http://irep.iium.edu.my/33932/4/Razali_capital_structure_thailand_evidencePub.pdf |
| Summary: | By employing panel data, the present study examines the dynamic aspects of capital structure of
269 non-financial listed firms in Thailand from 2000 to 2009. This is a relatively new area in
finance literature. The present study investigates the existence of target capital structure, speed
of adjustment and factors affecting the speed of adjustment. The analyses are conducted using
the dynamic Partial Adjustment Model (PAM) and estimated based on the Generalized Method
of Moments. The results indicate the existence of target capital structure and firms undergone
adjustment processes to be at their target capital structure from time to time with a considerably
rapid speed of adjustment, consistent with the dynamic trade-off theory. Firms in Thailand are
found to be under-adjusting, being below the required adjustment to be at the target within a
year. Strong evidence exists that indicates that firm specific factors significantly influence speed
of adjustment for firms in Thailand, such as distance from target, size of firm and profitability. |
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