An Integrated Model of Capital Structure to Study the Differences in the Speed of Adjustment to Target Corporate Debt Maturity Among Developed Countries

International Journal of Banking, Accounting and Finance, Vol. 3, No. 4, 2011

39 Pages Posted: 20 Dec 2011 Last revised: 29 May 2017

See all articles by Eleuterio Vallelado

Eleuterio Vallelado

University of Valladolid; University of Valladolid

Paolo Saona

Saint Louis University - Madrid Campus

Date Written: October 10, 2011

Abstract

In this paper we propose an integrated model of capital structure to study the partial adjustment process to the optimal long term debt ratio. In our analysis we consider the characteristics of the institutional environment as a factor that influences such adjustment. We use a sample of quoted firms from Germany, Denmark, Spain, Italy, United States, Australia, Belgium, United Kingdom and France for the period 1995-2004. The key findings are that the firms follow optimal long-term debt ratios. Such optimal ratios are determined by firm characteristics identified in the trade off, pecking order and market timing theories and by the country institutional environment. We observe that in those countries with lower cost of adjustment, essentially in those where banks are the main source of funds, firms can reach their target debt ratio in half the time needed by those countries with higher adjustment costs.

Keywords: capital structure, target debt maturity, institutional environment, panel data

JEL Classification: G32

Suggested Citation

Vallelado, Eleuterio and Saona, Paolo, An Integrated Model of Capital Structure to Study the Differences in the Speed of Adjustment to Target Corporate Debt Maturity Among Developed Countries (October 10, 2011). International Journal of Banking, Accounting and Finance, Vol. 3, No. 4, 2011, Available at SSRN: https://ssrn.com/abstract=1973552

Eleuterio Vallelado (Contact Author)

University of Valladolid ( email )

Avda. Valle Esgueva 6
47011 Valladolid, 47011
Spain
983423387 (Phone)
983186484 (Fax)

HOME PAGE: http://eleuteriovallelado.blogs.uva.es/

University of Valladolid ( email )

8 C/Plaza de Santa Cruz
Valladolid, Valladolid 47002
Spain
+34983423387 (Phone)

HOME PAGE: http://eleuteriovallelado.blogs.uva.es/

Paolo Saona

Saint Louis University - Madrid Campus ( email )

Avidena del Valle, 34 y 28
Madrid, 28003
Spain
0034 915 545858 (Phone)
0034 915 546202 (Fax)

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