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Macroeconomic Conditions and Capital Structure over the Business Cycle: Further Evidence in the Context of Taiwan

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  • Hsien-Hung H. Yeh
  • Eduardo Roca

Abstract

The authors examine the effect of macroeconomic conditions on the capital structure of firms in the petrochemical, textile, and electronics industries of Taiwan during the period 1983-2007, which covers six and a half business cycles. Controlling for the effects of economic growth, industry type, and firm-specific factors, we find that macroeconomic conditions have a significant effect on debt ratios during the sample period. Debt ratios of firms in these industries are procyclical during the period before the 1997-98 Asian financial crisis, but countercyclical during the period after the Asian financial crisis.

Suggested Citation

  • Hsien-Hung H. Yeh & Eduardo Roca, 2012. "Macroeconomic Conditions and Capital Structure over the Business Cycle: Further Evidence in the Context of Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(S3), pages 141-156, September.
    • Handle: RePEc:mes:emfitr:v:48:y:2012:i:s3:p:141-156
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    Cited by:

    1. Chen, Kuan-Hau & Su, Xuan-Qi & Lin, Li-Feng & Shih, Yi-Cheng, 2021. "Profitability of moving-average technical analysis over the firm life cycle: Evidence from Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).
    2. Sun, Wei & Geng, Danqing & Dong, Kaiqiang, 2021. "State of demand and excessive indebtedness: Evidence from Chinese listed manufacturing firms," Finance Research Letters, Elsevier, vol. 42(C).

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