Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 93: Dynamics of Capital Structure: The Case of Korean Listed Manufacturing Companies

Hyesung Kim, Almas Heshmati () and Dany Aoun
Additional contact information
Hyesung Kim: Seoul National University
Almas Heshmati: Ratio, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: firms is developed in this paper and results compared with the classical static model. This paper specifies and estimates the unobservable optimal capital structure using a wide range of observable determinants. Uunbalanced panel data of Korean listed firms for the period 1985 to 2002 is used in this study. In addition to identification and estimation of the effects of the determinants of capital structure and capital structure optimality, some Korea-specific features such as the structural break before and after the financial crisis, as well as affiliation to a chaebol business groups, are taken into account to verify whether the optimal capital structure was affected by the financial crisis or whether belonging to a chaebol has any effect, and if so, to what extent.

Keywords: Capital structure; debt; firm; panel data; adjustment; Korea

JEL-codes: C33; D21; G32

34 pages, April 25, 2006

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