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On the evolution of corporate capital structures

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  • Daniel Arce
  • Douglas Cook
  • Robert Kieschnick

Abstract

Most, if not all, published theoretical models of capital structure decisions assume that all firms follow the same capital structure decision process or strategy. We argue that such an assumption is inconsistent with extant evidence. Instead, we argue that there is heterogeneity in the decision processes and strategies that managers follow, and that they make adaptive adjustments to their strategies that are conditioned on the choices of other firms as well as their prior choices. Using data on U.S. corporate capital structures between 1965 and 2003, we find evidence that is consistent with our proposed alternative. Our characterization of the evolution of corporate capital structures emphasizes the roles of a firm’s initial capital structure and its competitors’ capital structure strategies. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Daniel Arce & Douglas Cook & Robert Kieschnick, 2015. "On the evolution of corporate capital structures," Journal of Evolutionary Economics, Springer, vol. 25(3), pages 561-583, July.
    • Handle: RePEc:spr:joevec:v:25:y:2015:i:3:p:561-583
    DOI: 10.1007/s00191-015-0394-8
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    Cited by:

    1. Kieschnick, Robert & Moussawi, Rabih, 2018. "Firm age, corporate governance, and capital structure choices," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 597-614.

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    More about this item

    Keywords

    Adaptive behavior; Heterogeneous agent types; Firm dynamics; Capital structure; Fractional variables; D20; G32;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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