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Capital structure adjustment in Korean retail firms

Title
Capital structure adjustment in Korean retail firms
Author
이정환
Keywords
Capital Structure; Adjustment Costs; Retail Industry
Issue Date
2017-11
Publisher
한국유통과학회
Citation
유통과학연구, v. 15, no. 11, page. 41-48
Abstract
Purpose - Capital structure adjustment costs influence the test of the standard trade-off theory of capital structure. We investigate whether there exist economically significant capital adjustment costs in the Korean retail industry.Research design, data, and methodology - This paper adopts the model of Leary and Roberts(2005) to obtain the hazard rate of capital structure variations. The retail firms traded in the KOSPI and KOSDAQ markets are analyzed from 2000 to 2016.Results - The empirical analysis shows infrequent capital structure adjustments in the Korean retail firms. The duration analysis emphasizes that the fixed adjustment cost plays an important role in the determination of capital structure adjustments for the Korean retail firms. Yet, even after taking account of infrequent capital structure adjustments, the trade off theory only weakly explains the capital structure variations of the Korean retail firms.Conclusions - This paper confirms the existence of capital structure adjustment costs for the Korean retail firms. Our results argue for the significance of fixed adjustment costs in capital structure adjustments. Such emphasis on the fixed cost is inconsistent with the existing studies. The trade off theory does not successfully explain capital structure policy in the Korean retail firms even after considering adjustment costs.
URI
https://www.kci.go.kr/kciportal/landing/article.kci?arti_id=ART002285938https://repository.hanyang.ac.kr/handle/20.500.11754/116099
ISSN
1738-3110; 2093-7717
DOI
10.15722/jds.15.11.201711.41
Appears in Collections:
COLLEGE OF ECONOMICS AND FINANCE[S](경제금융대학) > ECONOMICS & FINANCE(경제금융학부) > Articles
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