Supply of Capital and Capital Structure: The Role of Financial Development

74 Pages Posted: 17 Mar 2011 Last revised: 7 Jan 2016

See all articles by Angelos A. Antzoulatos

Angelos A. Antzoulatos

University of Piraeus - Department of Banking and Financial Management

Kostas Koufopoulos

University of Warwick - Finance Group

Costas Lambrinoudakis

University of Leeds - Leeds University Business School (LUBS)

Emmanuel D. Tsiritakis

University of Piraeus

Date Written: November 30, 2015

Abstract

We explore the effect of financial development on corporate capital structure and the tightness of financial constraints that firms face. We employ an econometric technique which allows us to explicitly test for convergence in capital structure. This technique increases the power of our statistical tests. In doing so, we identify a group of convergent firms. The driving force of convergence is financial development, which positively affects the firms’ leverage ratio. We also identify a group of firms, whose leverage is not affected by financial development, because they are financially constrained.

Keywords: Capital structure, Convergence, Financial constraints, Financial development

JEL Classification: G30, G32

Suggested Citation

Antzoulatos, Angelos A. and Koufopoulos, Kostas and Lambrinoudakis, Costas and Tsiritakis, Emmanuel D., Supply of Capital and Capital Structure: The Role of Financial Development (November 30, 2015). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1787068 or http://dx.doi.org/10.2139/ssrn.1787068

Angelos A. Antzoulatos

University of Piraeus - Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

Kostas Koufopoulos

University of Warwick - Finance Group ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

Costas Lambrinoudakis (Contact Author)

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

Emmanuel D. Tsiritakis

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece
00302104142187 (Phone)

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