A connection between financial constraints and financial efficiency

• Main Authors: Tao Hui-Chen, 陶慧珍
• Other Authors: Chan Chia-Chung
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/12648470785687976204

碩士 === 東海大學 === 財務金融學系 === 95 === This paper analyzes the determinants of dynamic capital structure adjustment process with dynamic panel data. When capital structure adjustment is costly, firms may deviate from the target capital structure temporarily. We use a two-step Generalized Method of Moments (GMM) estimation to endogenize the adjustment process. We analyze firm-specific characteristics and macroeconomic factors on the speed of adjustment towards target capital structure. We find that the adjustment speed is faster when economic prospects are good. We also categorize firms into financial constrained/unconstrained firms and high/low debt capacity firms to investigate if the adjustment process is different. We find financial constrained and low debt capacity firms are affected more seriously by macroeconomic conditions. The adjustment speed is faster in favorable macroeconomic conditions, and the low capacity firms are affected by macroeconomic conditions more than financial constrained firms. Our contribution is that we analyze the differential effects on target capital structure adjustment process across financial constrained/unconstrained firms and high/low debt capacity firms after endogenizing the adjustment process by dynamic model and a two-step Generalized Method of Moments (GMM) estimation.