Supply of capital and capital structure: the role of financial development

Konstantinos Koufopoulos; Angelos Antzoulatos; Costas Lambrinoudakis; Emmanuel Tsiritakis

doi:10.1016/j.jcorpfin.2016.01.011

Supply of capital and capital structure: the role of financial development

Konstantinos Koufopoulos, Angelos Antzoulatos, Costas Lambrinoudakis, Emmanuel Tsiritakis

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We explore the effect of financial development on corporate capital structure and the tightness of financial constraints that firms face. We employ an econometric technique that allows us to explicitly test for convergence in capital structure. This technique increases the power of our statistical tests. In doing so, we identify a group of convergent firms. The driving force of convergence is financial development, which positively affects the firms' leverage ratio. We also identify a group of firms, whose leverage is not affected by financial development, because
they are financially constrained.

Original language	English
Pages (from-to)	166-195
Number of pages	30
Journal	Journal of corporate finance
Volume	38
Early online date	30 Jan 2016
DOIs	https://doi.org/10.1016/j.jcorpfin.2016.01.011
Publication status	Published - Jun 2016

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10.1016/j.jcorpfin.2016.01.011

Cite this

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title = "Supply of capital and capital structure: the role of financial development",

abstract = "We explore the effect of financial development on corporate capital structure and the tightness of financial constraints that firms face. We employ an econometric technique that allows us to explicitly test for convergence in capital structure. This technique increases the power of our statistical tests. In doing so, we identify a group of convergent firms. The driving force of convergence is financial development, which positively affects the firms' leverage ratio. We also identify a group of firms, whose leverage is not affected by financial development, becausethey are financially constrained.",

author = "Konstantinos Koufopoulos and Angelos Antzoulatos and Costas Lambrinoudakis and Emmanuel Tsiritakis",

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AU - Tsiritakis, Emmanuel

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AB - We explore the effect of financial development on corporate capital structure and the tightness of financial constraints that firms face. We employ an econometric technique that allows us to explicitly test for convergence in capital structure. This technique increases the power of our statistical tests. In doing so, we identify a group of convergent firms. The driving force of convergence is financial development, which positively affects the firms' leverage ratio. We also identify a group of firms, whose leverage is not affected by financial development, becausethey are financially constrained.

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DO - 10.1016/j.jcorpfin.2016.01.011

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