Abstract

http://ssrn.com/abstract=2094228
 
 

References (31)



 


 



Adjustment Cost Determinants and Target Capital Structure


Kostas Koufopoulos


University of Warwick - Finance Group

Costas Lambrinoudakis


University of Piraeus - Department of Banking and Financial Management

November 7, 2013


Abstract:     
Dynamic trade-off models of capital structure predict negative correlation between adjustment speed and adjustment costs. This paper empirically tests this prediction. Our approach brings together elements from two strands of the literature: dynamic capital structure and security offerings literature. In contrast to existing studies, our approach employs directly measurable proxies for adjustment costs (security issuance cost) determinants. We 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


Download This Paper

Date posted: June 27, 2012 ; Last revised: February 27, 2014

Suggested Citation

Koufopoulos, Kostas and Lambrinoudakis, Costas, Adjustment Cost Determinants and Target Capital Structure (November 7, 2013). Available at SSRN: http://ssrn.com/abstract=2094228 or http://dx.doi.org/10.2139/ssrn.2094228

Contact Information

Kostas Koufopoulos
University of Warwick - Finance Group ( email )
Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain
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)
Feedback to SSRN


Paper statistics
Abstract Views: 10,134
Downloads: 2,668
Download Rank: 2,076
References:  31

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.313 seconds