scholarly journals Dynamic Capital Structure Adjustment: Which estimator yields consistent and efficient estimates?

2017 ◽  
Vol 9 (1) ◽  
pp. 209-227 ◽  
Author(s):  
Vusani Moyo
Keyword(s):  
Stock Exchange ◽  
Partial Adjustment ◽  
Gmm Estimator ◽  
Distributed Lag ◽  
Research Areas ◽  
Distributed Lag Model ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Study Results ◽  
Lagged Dependent Variable

The partial adjustment model is key to a number of corporate finance research areas. The model is by its nature an autoregressive-distributed lag model that is characterised by heterogeneity among individuals and autocorrelation due to the presence of the lagged dependent variable. Finding a suitable estimator to fit the model can be challenging, as the existing estimators differ significantly in their consistency and bias. This study used data drawn from 143 non-financial firms listed on the Johannesburg Stock Exchange (JSE) to test for the consistency and efficiency of the leading partial adjustment model estimators. The study results confirm the bias-corrected least squares dummy variable (LSDVC) initialised by the system generalised method of moments (GMM) estimator, the random effects Tobit estimator and the system GMM estimator as the most suitable estimators for the partial adjustment model. The difference GMM estimator and the Anderson-Hsiao instrumental variables estimator are inconsistent and biased in the context of the partial adjustment model.

scholarly journals Comparison of Determinants of Capital Structure in Lippo Group and Bakrie Group Companies Listed on the Indonesia Stock Exchange (Partial Adjustment Model Approach)

2021 ◽  
Vol 8 (2) ◽  
pp. 83-88
Author(s):  
Fildzah Fitria ◽  
Khaira Amalia Fachrudin ◽  
Amlys Syahputra Silalahi
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Company Size ◽  
Group Company ◽  
Partial Adjustment ◽  
Insignificant Effect ◽  
Adjustment Model ◽  
Growth Opportunity ◽  
Partial Adjustment Model ◽  
Model Approach

This study aims to determine the determinants of the capital structure of the Lippo Group and the Bakrie Group listed on the Indonesia Stock Exchange using the partial adjustment model approach. The population in the Lippo Group company is 12 and the population at the Bakrie Group company is 9. The sample of this study is that all companies listed on the Indonesia Stock Exchange are 21 companies. Data analysis used panel data regression method with partial adjustment model approach. The results of the research in the t test at the Lippo Group company show that the lag leverage has a positive and insignificant effect on leverage, profitability has a positive and significant effect on leverage, company size has a positive and insignificant effect on leverage, earning volatility has a positive and significant effect on leverage, assets tangibility has a positive and significant effect on leverage and growth opportunity has a positive and insignificant effect on leverage. The results of the research in the t test at the Bakrie Group company show that the lag leverage has a positive and insignificant effect on leverage, profitability has a positive and insignificant effect on leverage, company size has a positive and insignificant effect on leverage, earning volatility has a positive and insignificant effect on leverage, assets tangibility has a negative and insignificant effect on leverage, growth opportunity has a negative and insignificant effect on leverage. The partial adjustment model test results show that only Lippo Group company on the variables of profitability, earning volatility and assets tangibility have a significant positive effect on leverage. The results of the comparison of the optimal capital structure show that the Bakrie Group has a higher level of optimal capital structure by 83% than the Lippo Group at 55%. Keywords: Lag Leverage, Profitability, Company Size, Earning Volatility, Assets Tangibility, Growth Opportunity, Leverage.

scholarly journals Dividend policies of travel and leisure firms in the UK

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Erhan Kilincarslan ◽  
Sercan Demiralay
Keyword(s):  
Stock Exchange ◽  
Data Set ◽  
Partial Adjustment ◽  
Content Type ◽  
Dividend Policies ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Dividend Smoothing ◽  
Financial Characteristics ◽  
The Uk

Purpose This study aims to examine cash dividend practices of travel and leisure (T&L) companies listed on the London Stock Exchange (LSE). Design/methodology/approach The study uses a panel data set of 524 firm-year observations of 55 unique publicly listed UK T&L companies between 2007 and 2019. First, it uses a modified version of Lintner’s (1956) partial adjustment model for analysis regarding the target payout ratio and dividend smoothing. Second, it performs logit and Tobit models in ascertaining the association between financial characteristics and divided decisions of T&L firms. Finally, it applies the modified specification of the partial adjustment model on different sub-samples that are partitioned based on various financial factors to determine how the financial characteristics of T&L companies affect their dividend behavior. Findings The results show that UK T&L companies have long-term payout ratios and adjust their cash dividends by moving gradually to their target at a serious degree of smoothing. The findings also detect that financial characteristics of T&L firms (i.e. profitability, debt and size) have significant effects on their dividend payments decisions. In particular, more profitable and larger T&L corporations are more likely to pay cash dividends, whereas T&L companies with more debt are less likely to pay cash dividends in the UK. The results further reveal that although such financial characteristics also have important impacts on the target payout ratios and dividend smoothing levels, UK T&L companies generally adopt stable dividend policies over the period 2007-2019. Originality/value This is thought to be the first study to provide insights on dividend policy practices of UK travel and leisure corporation listed on the LSE.

scholarly journals Targeting Behavior among Indonesian Firms: Two-Step Partial Adjustment Model Analysis

2019 ◽  
Vol 10 (1) ◽  
pp. 92-101
Author(s):  
Dwi Cahyaningdyah
Keyword(s):  
Stock Exchange ◽  
Financial Industry ◽  
Partial Adjustment ◽  
Financial Decisions ◽  
Speed Of Adjustment ◽  
Current Period ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Target Firms ◽  
Target Leverage

In this research, we tested the heterogeneity of speed of adjustment toward target leverage among industries on the Indonesian stock exchange by using two-step partial adjustment model. The sample collected from 2007-2016 and consisted of firms in eight sectors, i.e. agriculture, mining, basic industries, miscellaneous, consumer goods, property and real estate, infrastructure, utilities and transportation as well as trade, services and investment sectors. Firms in the financial industry are excluded because the capital structure of firms in the financial industry reflects specific regulations and are not independent firms’ policies. The results showed that speed of adjustment ranged from 61% - 45% for book leverage and 67% - 43% for market leverage. This significant speed of adjustment is consistent with trade-off theory, which states that firms have target leverage and when firms are deviated from the target, firms will make financial decisions that will close the gap between previous year’s leverage and the target leverage of current period.

scholarly journals Testing the partial adjustment model of optimal cash holding: Evidence from Amman stock exchange

2015 ◽  
Vol 13 (1) ◽  
pp. 15-23
Author(s):  
Ziad Mohammad Zurigat ◽  
Nadia Jawdat
Keyword(s):  
Stock Exchange ◽  
Panel Data Analysis ◽  
Cash Holdings ◽  
Cash Flows ◽  
Cash Holding ◽  
Industrial Firms ◽  
Partial Adjustment ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Amman Stock Exchange

This study aims at testing the partial adjustment model of cash holdings to investigate whether Jordanian industrial firms have a target cash holdings and how fast they move toward that target when any target deviation exists. A sample of 57 industrial firms listed in the Amman Stock Exchange (ASE) over the period 2001-2013 is used. The study uses the estimated fitted values from the conventional cash equation as a proxy for the target cash holding. Using pooled and panel data analysis, the study provides evidence suggesting that cash flows, net working capital, leverage and firm size significantly affect the cash holdings of Jordanian firms. Moreover, it reveals that Jordanian industrial firms have a target cash level and make a target reversion whenever needed. However, Jordanian industrial firms adjust their actual cash holdings to its target level too slowly.

scholarly journals PENGARUH LIBERALISASI ARUS MODAL TERHADAP PERTUMBUHAN EKONOMI ASEAN-5

2020 ◽  
Vol 3 (2) ◽  
pp. 345-354
Author(s):  
Devilia Sitorus ◽  
Crisanty Sutristyaningtyas Titik
Keyword(s):  
Economic Growth ◽  
Significant Influence ◽  
Capital Flows ◽  
The Philippines ◽  
Financial Openness ◽  
Partial Adjustment ◽  
Adjustment Model ◽  
Partial Adjustment Model ◽  
Short And Long Term

This study aims to examine the relationship between capital flow liberalization and economic growth in ASEAN-5. This research is a quantitative study that uses data: GDP, Gross Capital Formation, financial disclosure seen from the Chinn-Ito index for the period 2000-2017 in 5 ASEAN countries namely Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Data were processed using panel data regression analysis and specifically for Indonesia, Partial Adjustment Model (PAM) regression was performed. The results of this study indicate that financial openness seen from the Chinn-Ito index has a negative and significant influence on the economic growth of ASEAN-5 countries. Capital flows have a positive and significant impact on the economic growth of ASEAN-5 countries. Meanwhile, the PAM (Partial Adjustment Model) regression model shows that capital flows have a positive and significant influence on Indonesia's economic growth both in the short and long term, while financial openness has a negative and significant impact on Indonesia's economic growth both in the short and long term.

scholarly journals The Heterogeneity of Speed of Adjustment Capital Structure Across Industrial Sectors

2021 ◽  
Vol 10 (1) ◽  
pp. 103-114
Author(s):  
Bibit Robiatun ◽  
Rini Setyo Witiastuti
Keyword(s):  
Capital Structure ◽  
Consumer Goods ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Partial Adjustment ◽  
Speed Of Adjustment ◽  
Basic Industry ◽  
Industrial Sectors ◽  
Partial Adjustment Model ◽  
Firm Characteristic

This study aims to analyze heterogeneity of speed of adjustment on basic industry, consumer goods, and misceleeneous companies. The population in this study uses basic industry, consumer goods, and miscellenoeus companies listed on the Indonesia Stock Exchange in 2009-2018 period. The method of determining the sample using a pusposive sampling technique based on criteries determined by researchers. We employ two-step partial adjustment model and use measure of book leverage and firm characteristic; profitability, size, tangibility, and growth which has an influence leverage target to estimate speed of adjustment. For three industries, there is evidence of heterogeneity of speef adjustment. The result showed that speed of adjustment 24% of basic industry, 37.1% of consumer goods, and 27.3% of miscellaneous industry.

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