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Has the past really passed? Strategic inertia and capital structure persistence

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  • Zhen Huang
  • Weiwei Gao

Abstract

Capital structure persistence is an important phenomenon in corporate finance, but we still know little about how strategic inertia influences firms' capital structure persistence. Using a sample of Chinese listed firms during 2004–2016, our results show that strategic inertia can facilitate the persistence of capital structure and confirm its information asymmetry channel. We also find that this effect is more pronounced when CEOs are without a financial background and CEOs have low ownership or long tenure, suggesting that the impact of strategic inertia on capital structure persistence depends on the CEO's financial background, tenure, and ownership characteristics. In addition, the effect of strategic inertia on capital structure persistence mainly exists in state‐owned firms rather than privately owned firms.

Suggested Citation

  • Zhen Huang & Weiwei Gao, 2022. "Has the past really passed? Strategic inertia and capital structure persistence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(4), pages 883-893, June.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:4:p:883-893
    DOI: 10.1002/mde.3424
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    1. Yu Wang & Xiaoying Chang & Tienan Wang, 2023. "Government directors as a double‐edged sword for strategic change: Strong resource provision but weak monitoring," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1802-1819, April.

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