Abstract

The major perspective of this paper is to provide more evidence regarding how “quickly”, in different macroeconomic states, firms adjust their capital structure to their leverage targets. This study extends the empirical research on the topic of capital structure by focusing on a quantile regression model to investigate the behavior of firm-specific and macroeconomic factors across all quantiles of distribution of leverage (book leverage and market leverage). Therefore, depending on a partial adjustment model, we find that the adjustment speed fluctuated in different stages of book versus market leverage. Furthermore, while macroeconomic states change, we detect clear differentiations of the contribution and the effects of the firm-specific and the macroeconomic variables between market leverage and book leverage debt ratios. Consequently, we deduce that across different macroeconomic states the nature and maturity of borrowing influence the persistence and endurance of the relation between determinants and borrowing. 

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