Trade-off theory of optimal capital structure and adjustment towards long run target : a dynamic panel approach

This paper examines the speed and costs of adjustment towards target capital structure choice of Nigerian firms based on the data of 115 Nigerian non-financial firms listed on the Nigerian stock exchange, for the period 1998-2012. The study employed two step system Generalized method of moment in a dynamic panel framework. The main finding of the study indicates that negative relationship exists between speed and costs of adjustment of firms in Nigeria. The study therefore concludes that firms in emerging market like Nigeria adjust relatively faster towards their target debt position.