Managing the gap between Actual and Target Capital Structure: An Evidence from Pakistan.
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Date
2015
Journal Title
Journal ISSN
Volume Title
Publisher
Journal of Management and Research.
Abstract
Investment framework is one of the most significant components that impact the company’s
value. Reliable funding choices for a company generally lead to a capital structure that
increases the firm’s value (Abor, 2006). Early studies provide contradictory reviews about a
company’s capital structure decisions. This paper investigates the partial adjustment model for
a company’s target capital structure. The study also explores how companies operating in
different sectors of Pakistani market adjust towards the target capital structure levels. The study
also recognizes that an unanticipated share price change also have an effect on the target
capital structure. The results indicate that companies do have target leverage and that their
adjustment speed varies from sector to sector of the Pakistani market. A typical sector closes
more than 50% of the gap between its actual and its target debt ratios within one year
Description
Keywords
Finance, Capital Structure, Adjustment Speed, Panel Data, GMM Estimation, Market Debt Ratio
Citation
Rafay, A., Gilani, U. J., & Ijaz, F. (2015). Managing the gap between Actual and Target Capital Structure: An Evidence from Pakistan. Journal of Management and Research, 1(2), 41-60.(Abdul Rafay, Usman Javed Gilani and Farrukh Ijaz) (UMT Journal)