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Advisor(s)
Abstract(s)
Purpose – This study aims to evaluate the impact of listed Portuguese
companies' specific determinants on adjustment of actual debt towards
target debt ratio. The specific determinants on adjustment of actual
debt towards target debt ratio that we consider are: asset
tangibility, size, profitability and market to book ratio.
Design/methodology/approach – Dynamic panel estimators are used to
determine adjustment of the actual level of debt towards optimal
level of debt, revealing the level of transaction costs borne by
companies. OLS regressions are also used, in order to estimate the
impacts of companies' specific determinants on debt adjustment.
Findings – The results suggest that transaction costs are relevant in
listed Portuguese companies' access to debt. Tangibility of assets
and size are determinants that contribute for a greater adjustment of
debt towards optimal level. The results also suggest that the capital
structure decisions of listed Portuguese companies can be explained
in the light of trade-off and pecking order theories, and not
according to what is forecast by market timing theory.
Originality/value – Through this study, the level of adjustment of
actual debt towards target debt ratio in the context of companies
belonging to under-developed capital markets are determined, in the
particular case of this study, belonging to the Portuguese capital
market. Furthermore, from target debt ratio depending on companies'
specific determinants, the explanatory power of trade-off, pecking
order and market timing theories are investigated. The results
contribute for a deeper understanding about companies' capital
structure decisions.
Description
Keywords
Portugal Debts Companies Cost estimates
Pedagogical Context
Citation
Serrasqueiro, Zélia; Rogão, Márcia (2009). Capital structure of listed portuguese companies: determinants of debt adjustment. Review of Accounting and Finance. ISSN 1475-7702. 8, p. 54-75