We investigate the capital structure of a large sample of corporations in 52 countries, focusing on the effects of macroeconomic and institutional characteristics on firms' dynamic behavior. We find that these characteristics affect both the optimal level of leverage and the adjustment process...

This paper incorporates the cost of adjustment between observed and optimal leverage in explaining the variation in firm?s equity or bank-debt financing investments. Using a dynamic adjustment approach identifies the determinants to capital structure between different financial systems. In...

The importance of capital structure is explored by comparing existing archetypes of financial systems through a new methodological application. Differences in firms’ cost of capital show that capital structure is relevant in R&D and other investment decisions. The conclusions are that 1) there...