Capital Structure Adjustments and Asymmetric Information

International Journal of Economics and Finance; Vol. 11, No. 12; 2019 ISSN 1916-971X E-ISSN 1916-9728 Published by Canadian Center of Science and Education

14 Pages Posted: 20 Nov 2019

Date Written: November 5, 2019

Abstract

The findings of this paper suggest another reason for capital structure adjustments besides the Trade-Off and Pecking Order theories propositions because asymmetric information impacts capital structure changes and deviations only for a quarter whilst stationarity impacts them for 4 quarters, even when controlled. Asymmetric information has been measured by Corwin Schultz bid-ask spread estimator and capital structure target as the mean of debt to equity ratio of 262 Nyse non-financial and non-regulated companies and their industries during 91 quarters. The data were analyzed with Johansen Fisher panel cointegration. The capital structure deviations last from 2 to 4 quarters and move toward a target.

Keywords: capital structure adjustments; Corwin Schultz bid ask spread estimator; asymmetric information; Johansen-Fisher panel cointegration; dynamic trade off theory; market microstructure

JEL Classification: C33; D82; G32;

Suggested Citation

Ripamonti, Alexandre, Capital Structure Adjustments and Asymmetric Information (November 5, 2019). International Journal of Economics and Finance; Vol. 11, No. 12; 2019 ISSN 1916-971X E-ISSN 1916-9728 Published by Canadian Center of Science and Education. Available at SSRN: https://ssrn.com/abstract=3484416

Alexandre Ripamonti (Contact Author)

Ibirapuera University ( email )

1329, Interlagos Avenue
Sao Paulo, Sao Paulo 04661-100
Brazil
+551156947984 (Phone)

HOME PAGE: http://www.ibirapuera.br

Register to save articles to
your library

Register

Paper statistics

Downloads
13
Abstract Views
67
PlumX Metrics