The Capital Structure of Swiss Companies: An Empirical Analysis Using Dynamic Panel Data
University of Geneva - Graduate School of Business (HEC-Geneva)
University of Geneva - Geneva School of Economics and Management (GSEM); University of Aberdeen - Business School; Swiss Finance Institute; University of Geneva - Geneva Finance Research Institute
University of Geneva - Hautes Études Commerciales (HEC-Genève)
European Financial Management, Vol. 11, No. 1, pp. 51-69, January 2005
In this paper, we analyse the determinants of the capital structure for a panel of 104 Swiss companies listed in the Swiss stock exchange. Dynamic tests are performed for the period 1991-2000. It is found that the size of companies and the importance of tangible assets are positively related to leverage, while growth and profitability are negatively associated with leverage. The sign of these relations suggest that both the pecking order and trade-off theories are at work in explaining the capital structure of Swiss companies, although more evidence exists to validate the latter theory. Our analysis also shows that Swiss firms adjust toward a target debt ratio, but the adjustment process is much slower than in most other countries. It is argued that reasons for this can be found in the institutional context.
Number of Pages in PDF File: 16
Date posted: January 12, 2005