The Capital Structure of Swiss Companies: an Empirical Analysis Using Dynamic Panel Data

In this paper, we analyse the determinants of the capital structure for a panel of 104 Swiss companies listed in the Swiss stock exchange. Dynamic tests are performed for the period 1991–2000. It is found that the size of companies and the importance of tangible assets are positively related to leve...

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Bibliographic Details
Published in:European financial management : the journal of the European Financial Management Association 2005-01, Vol.11 (1), p.51-69
Main Authors: Gaud, Philippe, Jani, Elion, Hoesli, Martin, Bender, André
Format: Article
Language:English
Subjects:
Capital structure
Debt
dynamic panel data
Finance
Financial management
G32
Leverage
pecking order theory
Stock exchange
Studies
Switzerland
trade-off theory
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Summary:In this paper, we analyse the determinants of the capital structure for a panel of 104 Swiss companies listed in the Swiss stock exchange. Dynamic tests are performed for the period 1991–2000. It is found that the size of companies and the importance of tangible assets are positively related to leverage, while growth and profitability are negatively associated with leverage. The sign of these relations suggest that both the pecking order and trade‐off theories are at work in explaining the capital structure of Swiss companies, although more evidence exists to validate the latter theory. Our analysis also shows that Swiss firms adjust toward a target debt ratio, but the adjustment process is much slower than in most other countries. It is argued that reasons for this can be found in the institutional context.
ISSN:1354-7798
1468-036X
DOI:10.1111/j.1354-7798.2005.00275.x