Business, Management and Accounting
4 years ago

Big firms adapt faster: How capital structure changes impact financial stability

RePEc: Research Papers in Economics
Firm Characteristics and Dynamic Capital Structure Adjustment
Wolfgang Drobetz, Pascal Pensa, Gabrielle Wanzenried

Paper Summary

The study looked at 706 European firms from 1983 to 2002 to understand how companies adjust their debt levels over time. They found that bigger and faster-growing firms are quicker to change their debt ratios. When firms stray far from their target debt levels, they adjust faster. Changes in market values also affect how companies adjust their debt. Firms facing financial difficulties tend to make fewer adjustments to their debt levels.

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