Capital Structure Targeting: Some New International Evidence
47 Pages Posted: 5 Jun 2018 Last revised: 19 Nov 2019
Date Written: November 16, 2019
This study provides evidence on the financial leverage targeting behavior for firms in a large international setting. Leverage targets and target deviations are plausibly influenced by the institutional environment and financial conditions. Firms from countries with strong legal institutions target lower leverage and higher long-term debt, whereas a financial structure based on the effectiveness of capital markets and better-functioning financial systems result in lower target leverage and lower long-term debt. Financial crisis has led to more prevalent target deviations. Better institutions and financial development significantly decrease the likelihood of target deviations.
Keywords: Target Capital Structure, Debt Maturity, International, Institutions
JEL Classification: G20, G32
Suggested Citation: Suggested Citation