Choi, S.B.; Sauka, K.; Lee, M. Dynamic Capital Structure Adjustment: An Integrated Analysis of Firm-Specific and Macroeconomic Factors in Korean Firms. Int. J. Financial Stud.2024, 12, 26.
Choi, S.B.; Sauka, K.; Lee, M. Dynamic Capital Structure Adjustment: An Integrated Analysis of Firm-Specific and Macroeconomic Factors in Korean Firms. Int. J. Financial Stud. 2024, 12, 26.
Choi, S.B.; Sauka, K.; Lee, M. Dynamic Capital Structure Adjustment: An Integrated Analysis of Firm-Specific and Macroeconomic Factors in Korean Firms. Int. J. Financial Stud.2024, 12, 26.
Choi, S.B.; Sauka, K.; Lee, M. Dynamic Capital Structure Adjustment: An Integrated Analysis of Firm-Specific and Macroeconomic Factors in Korean Firms. Int. J. Financial Stud. 2024, 12, 26.
Abstract
This study explores the capital structure determinants of Korean firms over an extensive period (1995-2021), encompassing both stable and crisis conditions. Employing a dynamic panel data model and the Generalized Method of Moments (GMM) estimation, we address the endogeneity issue introduced by the inclusion of lagged dependent variables. Our research integrates firm-specific internal factors with macroeconomic external variables to provide a comprehensive understanding of the influence of varying economic environments on capital structure.
Our study suggests that in times of economic stability, the capital structure decisions of a firm are more influenced by internal factors such as profitability. However, in periods of economic downturns, it's the external macroeconomic market conditions that tend to have a greater impact on these decisions. It's also noteworthy that both book leverage (BL) and market leverage (ML) exhibit quicker adjustments during stable periods as opposed to periods of crisis. This indicates a higher agility of firms in adapting their capital structures in stable normal conditions.
Our findings contribute to existing literature by offering a holistic view of capital structure determinants in Korean firms. They underscore the necessity of adaptable financial strategies that account for both internal dynamics and external economic conditions. This study fills a gap in current research, presenting new insights into the dynamics of capital structure in Korean firms and suggesting a multifaceted approach to understanding capital structure in diverse economic contexts.
Keywords
Dynamic Capital Structure; Capital Structure Determinants; GMM Estimation; Adaptable Financial Strategies
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
