The adjustment of capital structure and investment in the presence of Financial Obstacles
Post by MSF Chula at Tuesday, 8 August 2017 10:35 AM

This study investigates firms listed in Hong Kong, Japan and Thailand Stock
Exchange from 1992 to 2004. The study examined the firm characteristics that
determined target capital structure. The study considered the individual effect that
could be divided into 2 estimation methods: fixed effect and random effect.
The study found that firm’s level of debt and capital requirement effect the
speed and change of its capital structure. The results show that firm trends to retire
debt when face with a financial surplus and level of debt is above the target. Firm
issues debt when face with a financial deficit and below the target than above the
target. In other word, firm adjusts to target faster when they have a financial surplus
and above the target or they have a financial deficit and below the target. Firm adjusts
to target slower when they have a financial surplus and below the target or they have a
financial deficit and above the target. This is due to firm’s financing cost and debt
capacity in the future.

Last updated at Tuesday, 8 August 2017 10:35 AM