The Capital Structure of Swiss Companies: An Empirical Analysis using Dynamic Panel Data
University of Geneva - Graduate School of Business (HEC-Geneva)
University of Geneva - Graduate School of Business (HEC-Geneva); University of Aberdeen - Business School; Swiss Finance Institute
University of Geneva - Hautes Études Commerciales (HEC-Genève)
FAME Research Paper No. 68
In this paper, we analyze the determinants of the capital structure for a panel of 106 Swiss companies listed in the Swiss stock exchange. Both static and dynamic tests are performed for the period 1991-2000. It is found that the size of companies, the importance of tangible assets and business risk 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 theory and trade off hypothesis 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.
Number of Pages in PDF File: 40
Keywords: Capital structure, dynamic panel data, trade-off theory, pecking order theory
JEL Classification: G32working papers series
Date posted: May 27, 2003
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