Dynamics of Firms’ Capital Structures in the South and East Asian Countries
Posted: 16 Feb 2010
Date Written: February 15, 2010
This paper examines the dynamics of firms’ capital structure in the South and East Asian countries. From an empirical perspective, we used dynamic partial model that enabled us to discriminate between the various factors that impact on target debt ratio and those that impact on the speed of adjustment of the firms’ debt ratios respectively. Our retrospective analysis of the sequencing strategies of banking sector and stock market liberalization indicate that endogenous adjustment speed of firms’ debt ratios vary across firms and countries. The shorter lags or less spacing in between implementation of major liberalization policies have been associated with faster capital structure adjustment in some countries. We propose that these findings have important implications for the design and implementation of the financial reforms to predict the capital structure adjustment processes of the firms.
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