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

FAME Research Paper No. 68

40 Pages Posted: 27 May 2003

See all articles by Philippe Gaud

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); Swiss Finance Institute; University of Aberdeen - Business School

Andre Bender

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

Multiple version iconThere are 2 versions of this paper

Date Written: January 2003

Abstract

In this paper, we analyze the determinants of the capital structure for a panel of 106 Swiss companies listed in the Swiss stock exchange. Both static and dynamic tests are performed for the period 1991-2000. It is found that the size of companies, the importance of tangible assets and business risk 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 theory and trade off hypothesis 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.

Keywords: Capital structure, dynamic panel data, trade-off theory, pecking order theory

JEL Classification: G32

Suggested Citation

Gaud, Philippe and Jani, Elion and Hoesli, Martin Edward Ralph and Bender, Andre, The Capital Structure of Swiss Companies: An Empirical Analysis Using Dynamic Panel Data (January 2003). FAME Research Paper No. 68, Available at SSRN: https://ssrn.com/abstract=378120 or http://dx.doi.org/10.2139/ssrn.378120

Philippe Gaud (Contact Author)

Rentes Genevoises ( email )

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Elion Jani

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

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Geneva 4, Geneva 1211
Switzerland

Martin Edward Ralph Hoesli

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

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+41 22 379 8104 (Fax)

Swiss Finance Institute

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University of Aberdeen - Business School ( email )

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+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Andre Bender

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

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

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