IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v50y2015i3p341-361.html
   My bibliography  Save this article

A Dynamic Model of the Firm: Structural Explanations of Key Empirical Findings

Author

Listed:
  • Natalia Lazzati
  • Amilcar A. Menichini

Abstract

We derive a dynamic model of the firm in the spirit of the trade-off theory of capital structure that explains firm behavior in terms of firm characteristics. We show our model is consistent with many important findings about the cross-section of firms, including the negative relations between profitability and leverage, and between dividends and investment-cash flow sensitivities. The model also explains the existence of zero-debt firms and their observed characteristics. These results have been used to challenge the trade-off theory and the assumption of perfect capital markets. We revisit these critiques and provide structural explanations for the regularities we replicate.

Suggested Citation

  • Natalia Lazzati & Amilcar A. Menichini, 2015. "A Dynamic Model of the Firm: Structural Explanations of Key Empirical Findings," The Financial Review, Eastern Finance Association, vol. 50(3), pages 341-361, August.
    • Handle: RePEc:bla:finrev:v:50:y:2015:i:3:p:341-361
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/fire.12070
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matthew Spiegel, 2023. "For corporate finance to truly advance we need more genuinely testable models," The Financial Review, Eastern Finance Association, vol. 58(4), pages 657-661, November.
    2. Sohail AMJED* & S.M. Amir SHAH**, 2017. "The Impact of Leverage Variances on Growth: A Longitudinal Study of Pakistan’s Corporate Sector," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(2), pages 249-266.
    3. Menichini, Amilcar A., 2020. "How do firm characteristics affect the corporate income tax revenue?," International Review of Economics & Finance, Elsevier, vol. 65(C), pages 146-162.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:50:y:2015:i:3:p:341-361. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.