Adjustment Speed of Capital Structure: Effect of Organizational and Performance Characteristics (Comparison between Financial and Non-Financial Sectors)
Financing decisions such as capital structure have gained much attention in literature of financial development over the last decade. Capital structure deviations from its optimal level can occur for various reasons. According to the dynamic trade-off theory, continuous adjustment of capital structu...
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University of Sistan and Baluchestan
2024-12-01
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| Series: | International Journal of Business and Development Studies |
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| Online Access: | https://ijbds.usb.ac.ir/article_8731_8f0a94ceaf32b04268b17dfce1f49a3d.pdf |
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| author | Saeed Dehghan Khavari Seyed Hossein Mirjalili Mohammad Hossein Abdorrahimian Farida Khosh Sirat |
| author_facet | Saeed Dehghan Khavari Seyed Hossein Mirjalili Mohammad Hossein Abdorrahimian Farida Khosh Sirat |
| author_sort | Saeed Dehghan Khavari |
| collection | DOAJ |
| description | Financing decisions such as capital structure have gained much attention in literature of financial development over the last decade. Capital structure deviations from its optimal level can occur for various reasons. According to the dynamic trade-off theory, continuous adjustment of capital structure to maximize company value is essential. If companies adjust their capital structure quickly towards the target leverage, past financing activities and historical market conditions will only have short-term effects on the current capital structure. Conversely, if companies adjust their capital structure slowly, the opposite is true. We examine the relationship between organizational and performance characteristics and capital structure, as well as the speed of adjustment, in financial and non-financial firms listed on the Tehran Stock Exchange and compare these effects between the two categories of companies. The statistical population consists of companies listed on the Tehran Stock Exchange from 2017 to 2022. The results show that the speed of capital structure adjustment is lower in the financial sector compared to the non-financial sector. Additionally, three performance variables—profitability, growth opportunities, and liquidity—are statistically significant and impact capital structure and its adjustment speed in both financial and non-financial sectors. However, the growth opportunities variable has a different effect direction in the financial sector compared to the non-financial sector, while the age variable does not have a significant effect. Regarding organizational characteristics—complexity, institutional ownership, and size—only organizational complexity in the financial sector is significant at a 95% confidence level, while all organizational characteristics are significant in the non-financial sector |
| format | Article |
| id | doaj-art-b17a2090809b4912b997b9000c78fa8b |
| institution | Kabale University |
| issn | 2538-3302 2538-3310 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | University of Sistan and Baluchestan |
| record_format | Article |
| series | International Journal of Business and Development Studies |
| spelling | doaj-art-b17a2090809b4912b997b9000c78fa8b2025-01-15T06:03:05ZengUniversity of Sistan and BaluchestanInternational Journal of Business and Development Studies2538-33022538-33102024-12-0116222124210.22111/ijbds.2024.49669.21448731Adjustment Speed of Capital Structure: Effect of Organizational and Performance Characteristics (Comparison between Financial and Non-Financial Sectors)Saeed Dehghan Khavari0Seyed Hossein Mirjalili1Mohammad Hossein Abdorrahimian2Farida Khosh Sirat3Assistant Professor, Department of Economics, Meybod University, Meybod, IranProfessor of Economics, Institute for Humanities and Cultural Studies, Iran, Email: h.jalili@yahoo.comInstructor, Department of Management, Meybod University, Meybod, IranMA of Financial Management, Department of Financial Engineering, Science and Arts University, Yazd, IranFinancing decisions such as capital structure have gained much attention in literature of financial development over the last decade. Capital structure deviations from its optimal level can occur for various reasons. According to the dynamic trade-off theory, continuous adjustment of capital structure to maximize company value is essential. If companies adjust their capital structure quickly towards the target leverage, past financing activities and historical market conditions will only have short-term effects on the current capital structure. Conversely, if companies adjust their capital structure slowly, the opposite is true. We examine the relationship between organizational and performance characteristics and capital structure, as well as the speed of adjustment, in financial and non-financial firms listed on the Tehran Stock Exchange and compare these effects between the two categories of companies. The statistical population consists of companies listed on the Tehran Stock Exchange from 2017 to 2022. The results show that the speed of capital structure adjustment is lower in the financial sector compared to the non-financial sector. Additionally, three performance variables—profitability, growth opportunities, and liquidity—are statistically significant and impact capital structure and its adjustment speed in both financial and non-financial sectors. However, the growth opportunities variable has a different effect direction in the financial sector compared to the non-financial sector, while the age variable does not have a significant effect. Regarding organizational characteristics—complexity, institutional ownership, and size—only organizational complexity in the financial sector is significant at a 95% confidence level, while all organizational characteristics are significant in the non-financial sectorhttps://ijbds.usb.ac.ir/article_8731_8f0a94ceaf32b04268b17dfce1f49a3d.pdfperformance characteristicsorganizational characteristicsadjustment speedcapital structure |
| spellingShingle | Saeed Dehghan Khavari Seyed Hossein Mirjalili Mohammad Hossein Abdorrahimian Farida Khosh Sirat Adjustment Speed of Capital Structure: Effect of Organizational and Performance Characteristics (Comparison between Financial and Non-Financial Sectors) International Journal of Business and Development Studies performance characteristics organizational characteristics adjustment speed capital structure |
| title | Adjustment Speed of Capital Structure: Effect of Organizational and Performance Characteristics (Comparison between Financial and Non-Financial Sectors) |
| title_full | Adjustment Speed of Capital Structure: Effect of Organizational and Performance Characteristics (Comparison between Financial and Non-Financial Sectors) |
| title_fullStr | Adjustment Speed of Capital Structure: Effect of Organizational and Performance Characteristics (Comparison between Financial and Non-Financial Sectors) |
| title_full_unstemmed | Adjustment Speed of Capital Structure: Effect of Organizational and Performance Characteristics (Comparison between Financial and Non-Financial Sectors) |
| title_short | Adjustment Speed of Capital Structure: Effect of Organizational and Performance Characteristics (Comparison between Financial and Non-Financial Sectors) |
| title_sort | adjustment speed of capital structure effect of organizational and performance characteristics comparison between financial and non financial sectors |
| topic | performance characteristics organizational characteristics adjustment speed capital structure |
| url | https://ijbds.usb.ac.ir/article_8731_8f0a94ceaf32b04268b17dfce1f49a3d.pdf |
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