Abstract

http://ssrn.com/abstract=2094228
 
 

References (31)



 


 



Adjustment Cost Determinants and Target Capital Structure


Costas Lambrinoudakis


University of Piraeus - Department of Banking and Financial Management

November 10, 2014


Abstract:     
Dynamic trade-off models of capital structure predict negative correlation between adjustment speed and adjustment costs. This paper empirically tests this prediction. My approach brings together elements from two strands of the literature: dynamic capital structure and security offerings literature. In contrast to existing studies, my approach employs directly measurable proxies for adjustment costs (security issuance cost) determinants. I find that the correlation between adjustment costs and the speed of adjustment is positive or zero. From a dynamic trade-off perspective, these results are puzzling as they suggest that transaction costs cannot explain the observed pattern of the capital structure adjustment process.

Number of Pages in PDF File: 68

Keywords: capital structure, target leverage, adjustment speed, security issuance costs

JEL Classification: G32

working papers series





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Date posted: June 27, 2012 ; Last revised: November 11, 2014

Suggested Citation

Lambrinoudakis, Costas, Adjustment Cost Determinants and Target Capital Structure (November 10, 2014). Available at SSRN: http://ssrn.com/abstract=2094228 or http://dx.doi.org/10.2139/ssrn.2094228

Contact Information

Costas Lambrinoudakis (Contact Author)
University of Piraeus - Department of Banking and Financial Management ( email )
80 Karaoli & Dimitriou Str.
Piraeus, 18534 - GR
Greece
(+30) 210 414 2323 (Phone)
(+30) 210 414 2341 (Fax)
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