The Capital Structure of Swiss Companies: An Empirical Analysis Using Dynamic Panel Data

16 Pages Posted: 12 Jan 2005  

Philippe Gaud

Rentes Genevoises

Elion Jani

University of Geneva - Geneva Finance Research Institute (GFRI)

Martin Hoesli

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

Andre Bender

University of Geneva - Hautes Études Commerciales (HEC-Genève)

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Abstract

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.

Suggested Citation

Gaud, Philippe and Jani, Elion and Hoesli, Martin and Bender, Andre, The Capital Structure of Swiss Companies: An Empirical Analysis Using Dynamic Panel Data. European Financial Management, Vol. 11, No. 1, pp. 51-69, January 2005. Available at SSRN: https://ssrn.com/abstract=647727

Philippe Gaud (Contact Author)

Rentes Genevoises ( email )

Place du Molard 11
CP 3013
Geneva 3, 1211
Switzerland

Elion Jani

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland

Martin Edward Ralph Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Swiss Finance Institute ( email )

24 rue du Général-Dufour
Geneva, CH - 1211
Switzerland

University of Geneva - Geneva Finance Research Institute ( email )

Geneva
Switzerland

Andre Bender

University of Geneva - Hautes Études Commerciales (HEC-Genève) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland
+41 22 705 8135 (Phone)

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