The capital structure of Swiss companies: an empirical analysis using dynamic panel data

Martin Edward Ralph Hoesli, P. Gaud, E. Jani, A. Bender

Research output: Contribution to journalArticle

138 Citations (Scopus)

Abstract

In this paper, we analyse the determinants of the capital structure for a panel of 104 Swiss companies listed in the Swiss stock exchange. Dynamic tests are performed for the period 1991-2000. It is found that the size of companies and the importance of tangible assets 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 and trade-off theories 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.

Original languageEnglish
Pages (from-to)51-70
Number of pages19
JournalEuropean Financial Management
Volume11
Issue number1
DOIs
Publication statusPublished - 2005

Keywords

  • capital structure
  • dynamic panel data
  • trade-off theory
  • pecking order theory
  • CORPORATE FINANCING DECISIONS
  • TESTING STATIC TRADEOFF
  • PECKING ORDER MODELS
  • AGENCY COSTS
  • MANAGERIAL DISCRETION
  • STRUCTURE CHOICE
  • DEBT
  • DETERMINANTS
  • INVESTMENT
  • OPPORTUNITIES

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