Target Capital Structure and Adjustment Speed- a dynamic panel data analysis of Swedish firms
TargetCapital structureAdjustment speedPanel dataRegressionManagement of enterprisesFöretagsledningManagementBusiness and Economics
The purpose of this thesis is to test whether firms have target capital structure, and if so with what speed they adjust toward this target. Findings that support this purpose are also in line with the trade off theory. One of the key elements of this thesis is the method used, which successfully enables fulfilling the purpose. The panel data method captures the data characteristics of the cross sectional and time series dimension. By using this approach the dynamic effects of capital structure can be studied, thus if there actually is an adjustment towards a target the speed can be estimated. The results of this thesis display evidence that nonfinancial firms identified and took actions to reach a target capital structure during the period 1982-2005. Analysing the results with the different capital structure theories as starting point the results are in line with the thoughts that constitutes the trade-off theory. Further, when looking at previous research which in different ways has been confirming the trade-off theory by recognising an adjustment speed towards a target capital structure, the study is found to be in line with those adjustment speeds documented by other researchers.