Capital Structure Theories and Speed of Capital Adjustment towards Target Capital Structure along Life Cycle Stages of Asian Manufacturing Firms
Purpose: Firms have different costs and benefits and asymmetric information across their life cycle stages and hence each stage has different financial pattern and speed of adjustment towards target capital. Methodology: We use System GMM to test the hypotheses. We use market leverages proxies f...
Main Authors: | , , , |
---|---|
Format: | Article |
Language: | English |
Published: |
CSRC Publishing
2020-03-01
|
Series: | Journal of Accounting and Finance in Emerging Economies |
Subjects: | |
Online Access: | https://publishing.globalcsrc.org/ojs/index.php/jafee/article/view/1048 |
id |
doaj-989364d106c148e5a1720ad91d6f21f6 |
---|---|
record_format |
Article |
spelling |
doaj-989364d106c148e5a1720ad91d6f21f62020-11-25T03:46:45ZengCSRC PublishingJournal of Accounting and Finance in Emerging Economies2519-03182518-84882020-03-016110.26710/jafee.v6i1.1048Capital Structure Theories and Speed of Capital Adjustment towards Target Capital Structure along Life Cycle Stages of Asian Manufacturing FirmsMuhammad Sajid Amin0Hashim Khan1Imran Abbas Jaddon2Muhammad Tahir3PhD Research Scholar, Faculty of Management Sciences, COMSATS University Islamabad, PakistanAssistant Professor, Faculty of Management Sciences, COMSATS University Islamabad, PakistanAssistant Professor, Faculty of Management Sciences, COMSATS University Islamabad, PakistanAssistant Professor, Faculty of Management Sciences, COMSATS University Islamabad, Pakistan Purpose: Firms have different costs and benefits and asymmetric information across their life cycle stages and hence each stage has different financial pattern and speed of adjustment towards target capital. Methodology: We use System GMM to test the hypotheses. We use market leverages proxies for the capital structure, life cycle proxies: introduction, growth, mature, shakeout and decline and the control determinants of capital structure such as profitability, tangibility, firm size and growth opportunities. We estimate the financial pattern and speed of adjustment along life cycle stages of manufacturing firms from eleven Asian economies over the period of 2010-2018. Findings: The results show that firms in earlier stages have more long term debt than mature stage. The speed of adjustment towards target capital structure is highest in mature stage than the other stages. The control determinants significantly affect market leverages. Implications: The findings suggest that management has to consider life cycle stages of their firms in order to adjust capital structure. Stockholders should consider stage of firm with relation to profitability and capital structure for long term prospects. https://publishing.globalcsrc.org/ojs/index.php/jafee/article/view/1048Capital Structure TheoriesLife Cycle StagesSpeed of AdjustmentMarket Leverages |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Muhammad Sajid Amin Hashim Khan Imran Abbas Jaddon Muhammad Tahir |
spellingShingle |
Muhammad Sajid Amin Hashim Khan Imran Abbas Jaddon Muhammad Tahir Capital Structure Theories and Speed of Capital Adjustment towards Target Capital Structure along Life Cycle Stages of Asian Manufacturing Firms Journal of Accounting and Finance in Emerging Economies Capital Structure Theories Life Cycle Stages Speed of Adjustment Market Leverages |
author_facet |
Muhammad Sajid Amin Hashim Khan Imran Abbas Jaddon Muhammad Tahir |
author_sort |
Muhammad Sajid Amin |
title |
Capital Structure Theories and Speed of Capital Adjustment towards Target Capital Structure along Life Cycle Stages of Asian Manufacturing Firms |
title_short |
Capital Structure Theories and Speed of Capital Adjustment towards Target Capital Structure along Life Cycle Stages of Asian Manufacturing Firms |
title_full |
Capital Structure Theories and Speed of Capital Adjustment towards Target Capital Structure along Life Cycle Stages of Asian Manufacturing Firms |
title_fullStr |
Capital Structure Theories and Speed of Capital Adjustment towards Target Capital Structure along Life Cycle Stages of Asian Manufacturing Firms |
title_full_unstemmed |
Capital Structure Theories and Speed of Capital Adjustment towards Target Capital Structure along Life Cycle Stages of Asian Manufacturing Firms |
title_sort |
capital structure theories and speed of capital adjustment towards target capital structure along life cycle stages of asian manufacturing firms |
publisher |
CSRC Publishing |
series |
Journal of Accounting and Finance in Emerging Economies |
issn |
2519-0318 2518-8488 |
publishDate |
2020-03-01 |
description |
Purpose: Firms have different costs and benefits and asymmetric information across their life cycle stages and hence each stage has different financial pattern and speed of adjustment towards target capital.
Methodology: We use System GMM to test the hypotheses. We use market leverages proxies for the capital structure, life cycle proxies: introduction, growth, mature, shakeout and decline and the control determinants of capital structure such as profitability, tangibility, firm size and growth opportunities. We estimate the financial pattern and speed of adjustment along life cycle stages of manufacturing firms from eleven Asian economies over the period of 2010-2018.
Findings: The results show that firms in earlier stages have more long term debt than mature stage. The speed of adjustment towards target capital structure is highest in mature stage than the other stages. The control determinants significantly affect market leverages.
Implications: The findings suggest that management has to consider life cycle stages of their firms in order to adjust capital structure. Stockholders should consider stage of firm with relation to profitability and capital structure for long term prospects.
|
topic |
Capital Structure Theories Life Cycle Stages Speed of Adjustment Market Leverages |
url |
https://publishing.globalcsrc.org/ojs/index.php/jafee/article/view/1048 |
work_keys_str_mv |
AT muhammadsajidamin capitalstructuretheoriesandspeedofcapitaladjustmenttowardstargetcapitalstructurealonglifecyclestagesofasianmanufacturingfirms AT hashimkhan capitalstructuretheoriesandspeedofcapitaladjustmenttowardstargetcapitalstructurealonglifecyclestagesofasianmanufacturingfirms AT imranabbasjaddon capitalstructuretheoriesandspeedofcapitaladjustmenttowardstargetcapitalstructurealonglifecyclestagesofasianmanufacturingfirms AT muhammadtahir capitalstructuretheoriesandspeedofcapitaladjustmenttowardstargetcapitalstructurealonglifecyclestagesofasianmanufacturingfirms |
_version_ |
1724504425470361600 |