The dynamic model of partial adjustment of the capital structure: Meta-analysis and a case of Polish enterprises

Abstract

The impact of company characteristics on bank debt financing has always been a field of conflicts among economists (e.g. trade-off theory vs. pecking order theory). The aim of this study is to investigate the adjustment speed of the capital structure to the optimal one. It has been verified how both company characteristics and macroeconomic factors affect adjustments toward a leverage target. This study provides a systematic analysis of the empirical literature on the leverage by conducting a meta-analysis. In particular, the problem of publication selection bias is discussed. Our results indicate that there is an evidence of such publication selection. For Polish case, we have found that the estimation of coefficient for lagged leverage is equal to 58.45%. It means that companies adjust its current level of leverage to the optimal value at a rate of 41.55% per year, so they need 1.3 years to reduce half of the distance to the optimum leverage. In comparison with results obtained by other researchers, it is relatively high rate of adjustment.