Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/24809
Authors: 
Lööf, Hans
Year of Publication: 
2003
Series/Report no.: 
ZEW Discussion Papers 03-06
Abstract: 
This paper incorporates the cost of adjustment between observed and optimal leverage in explaining the variation in firm?s equity or bank-debt financing investments. Using a dynamic adjustment approach identifies the determinants to capital structure between different financial systems. In relation to firm sales U.K and U.S firms have 50-100 percent more equity financing than Swedish firms depending on which measure used, while the ratio of debt to sales is highest in Sweden. The major findings are that observed leverage often deviates from the target leverage in both equity and debt dominated systems. There are large and also unexpected crosscountry differences in determinants to optimal capital structure. Swedish and U.K. firms deviate more from the optimal level than U.S firms. A faster speed towards the target is observed in the equity based systems.
Subjects: 
Capital structure
dynamic adjustment
panel data
optimal leverage
financial markets
cross-country comparison
technological change
JEL: 
O31
G32
O16
C51
C23
Document Type: 
Working Paper

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