Institutional determinants of capital structure adjustment speeds

Authors

Özde Öztekin, University of Kansas School of Business
Mark J. Flannery, Warrington College of Business

Date of this Version

1-1-2012

Document Type

Article

Rights

default

Abstract

Many authors relate a firm's performance to legal and political features and the regulatory environment in which it operates. This article compares firms' capital structure adjustments across countries and investigates whether institutional differences help explain the variance in estimated adjustment speeds. We find that legal and financial traditions significantly correlate with firm adjustment speeds. More narrowly, institutional features also relate to adjustment speeds, consistent with the hypothesis that better institutions lower the transaction costs associated with adjusting a firm's leverage. Such associations between institutional arrangements and leverage adjustment speeds are consistent with the dynamic trade-off theory of capital structure choice. © 2011 Elsevier B.V.

Recommended Citation

Öztekin, Özde and Flannery, Mark J., "Institutional determinants of capital structure adjustment speeds" (2012). College of Business Faculty Publications. 22.
https://digitalcommons.fiu.edu/business_fac/22