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
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: Suggested Citation