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Capital Structure Dynamics with Interrelated Adjustment: Australian Evidence

Author

Listed:
  • Paul Gatward

    (School of Banking and Finance, The University of New South Wales, Sydney NSW 2052; E-mail: I Sharpe@unsw.edu.au)

  • Ian G. Sharpe

    (School of Banking and Finance, The University of New South Wales, Sydney NSW 2052; E-mail: I Sharpe@unsw.edu.au)

Abstract

The paper examines the dynamics of financial structure decisions through the specification and estimation of a dynamic model of capital structure choice. Using a multivariate adjustment model and pooled annual time series/crosssectional data for 164 publicly listed Australian firms over the 1967–1985 period, we find evidence of interrelated adjustment, interdependence in investment and financing decisions, and very slow adjustment to the desired capital structure. The model also sheds light on the long-run determinants of capital structure of Australian firms, including their debt maturity choice.

Suggested Citation

  • Paul Gatward & Ian G. Sharpe, 1996. "Capital Structure Dynamics with Interrelated Adjustment: Australian Evidence," Australian Journal of Management, Australian School of Business, vol. 21(2), pages 89-112, December.
    • Handle: RePEc:sae:ausman:v:21:y:1996:i:2:p:89-112
    DOI: 10.1177/031289629602100201
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    References listed on IDEAS

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    3. Serrano Cinca, C. & Mar Molinero, C. & Gallizo Larraz, J.L., 2005. "Country and size effects in financial ratios: A European perspective," Global Finance Journal, Elsevier, vol. 16(1), pages 26-47, August.
    4. Shumi Akhtar, 2005. "The Determinants of Capital Structure for Australian Multinational and Domestic Corporations," Australian Journal of Management, Australian School of Business, vol. 30(2), pages 321-341, December.

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