The Long-Term Stability of Corporate Capital Structure: Evidence from Japanese Firms

36 Pages Posted: 28 Jan 2016

See all articles by Akitoshi Ito

Akitoshi Ito

Hitotsubashi University Business School

Toshitaka Mikabe

TOMA Consultants Group Co., Ltd.

Mikiharu Noma

Hitotsubashi University - Graduate School of International Corporate Strategy

Date Written: December 16, 2015

Abstract

This paper attempts to examine whether there exists long-term stability of corporate leverage among Japanese firms, following the study of Lemmon, Roberts and Zender (2008) who find that US firms exhibit the remarkable long-term stability of leverage. The obtained results show that the leverage cross-sections of Japanese firms are also stable for a long time. Specifically, firms with relatively high (low) leverage continue to exhibit relatively high (low) leverage for twenty years. The results indicate that the theory of capital structure should incorporate permanent, time-invariant factors as important determinants of corporate capital structure. We also obtain the additional evidence that loans from commercial banks contribute to the stability of leverage considerably for Japanese firms.

Keywords: leverage, persistence, capital structure, permanent component, bank loans

JEL Classification: G32, G30

Suggested Citation

Ito, Akitoshi and Mikabe, Toshitaka and Noma, Mikiharu, The Long-Term Stability of Corporate Capital Structure: Evidence from Japanese Firms (December 16, 2015). Available at SSRN: https://ssrn.com/abstract=2722890 or http://dx.doi.org/10.2139/ssrn.2722890

Akitoshi Ito (Contact Author)

Hitotsubashi University Business School ( email )

2-1-2 Hitotsubashi
Chiyoda-ku, Tokyo, 101-8439
Japan

Toshitaka Mikabe

TOMA Consultants Group Co., Ltd. ( email )

Mikiharu Noma

Hitotsubashi University - Graduate School of International Corporate Strategy ( email )

2-1-2 Hitotsubashi, Chiyoda-ku
Tokyo 101-0003, Chiyoda-ku 101-8439
Japan

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