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| Author: | Haas, R. de Peeters, M. |
| Title: | The dynamic adjustment towards target capital structures of firms in transition economies |
| Journal: | Economics of transition
2006 : VOL. 14:1, p. 133-169 |
| Index terms: | finance banks capital structure of companies transition economies models Central Europe Eastern Europe |
| Language: | eng |
| Abstract: | This paper examines the capital structure (here as: cap-str.) dynamics of Central and Eastern European firms as to better understand the quantitative and qualitative development of the region's financial systems. The dynamic model used endogenizes the target (here as: trg.) leverage (here as: lvg.) as well as the adjustment speed. It is applied to microeconomic data for 10 countries. It is found that during the transition process, firms generally increased their lvg., lowering the gap btw. the actual and the trg. lvg. Profitability and age are the most robust determinants of cap-str. trgts. Although banking system development has in general enabled firms to get closer to their lvg. trgts., information asymmetries btw. firms and banks are still relatively large. As a result, firms prefer internal finance above bank debt and adjust lvg. only slowly. |
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