TY - JOUR
T1 - Dynamic target capital structure and speed of adjustment in farm business
AU - Aderajew, Tamirat S.
AU - Trujillo-barrera, Andres
AU - Pennings, Joost M.E.
PY - 2019/9/1
Y1 - 2019/9/1
N2 - This paper quantifies the determinants and speed of adjustment to the target capital structure for a panel of 1,500 Dutch farms over the years 2001–2015. Using the System General Method of Moments (System-GMM) estimator, the results show that farm profitability, earnings volatility, asset tangibility and growth opportunity are important determinants of leverage. Leverage is highly persistent, i.e. the average adjustment speed is relatively low, with variations among farm types. This variation is mainly attributed to the difference in adjustment costs. Further, we show that the pecking order and signalling theories explain these leverage dynamics.
AB - This paper quantifies the determinants and speed of adjustment to the target capital structure for a panel of 1,500 Dutch farms over the years 2001–2015. Using the System General Method of Moments (System-GMM) estimator, the results show that farm profitability, earnings volatility, asset tangibility and growth opportunity are important determinants of leverage. Leverage is highly persistent, i.e. the average adjustment speed is relatively low, with variations among farm types. This variation is mainly attributed to the difference in adjustment costs. Further, we show that the pecking order and signalling theories explain these leverage dynamics.
U2 - 10.1093/erae/jby035
DO - 10.1093/erae/jby035
M3 - Article
VL - 46
SP - 637
EP - 661
JO - European Review of Agricultural Economics
JF - European Review of Agricultural Economics
SN - 0165-1587
IS - 4
ER -