Capital Structure Volatility in Europe

Gareth Campbell; Meeghan Rogers

doi:10.1016/j.irfa.2017.11.008

Capital Structure Volatility in Europe

Gareth Campbell, Meeghan Rogers

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Abstract

Contrary to the predictions of the trade-off theory, we find that many companies in Europe had substantial variation in their capital structures between 2006 and 2016. We show that this pattern occurred across countries. Companies with the most volatile debt ratios tended to be smaller, and were less profitable. Their high debt volatility was partly due to high volatility in operating and investing activities, and partly due to a reduced propensity to let cash balances and equity payouts absorb the fluctuations.

Original language	English
Pages (from-to)	128-139
Number of pages	12
Journal	International Review of Financial Analysis
Volume	55
Early online date	02 Dec 2017
DOIs	https://doi.org/10.1016/j.irfa.2017.11.008
Publication status	Published - Jan 2018

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Capital structure volatility in Europe
© 2017 Elsevier Inc. All rights reserved. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/,which permits distribution and reproduction for noncommercial purposes, provided the author and source are cited.
Accepted author manuscript, 264 KBLicence: CC BY-NC-ND

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title = "Capital Structure Volatility in Europe",

abstract = "Contrary to the predictions of the trade-off theory, we find that many companies in Europe had substantial variation in their capital structures between 2006 and 2016. We show that this pattern occurred across countries. Companies with the most volatile debt ratios tended to be smaller, and were less profitable. Their high debt volatility was partly due to high volatility in operating and investing activities, and partly due to a reduced propensity to let cash balances and equity payouts absorb the fluctuations.",

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AB - Contrary to the predictions of the trade-off theory, we find that many companies in Europe had substantial variation in their capital structures between 2006 and 2016. We show that this pattern occurred across countries. Companies with the most volatile debt ratios tended to be smaller, and were less profitable. Their high debt volatility was partly due to high volatility in operating and investing activities, and partly due to a reduced propensity to let cash balances and equity payouts absorb the fluctuations.

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JO - International Review of Financial Analysis

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Capital Structure Volatility in Europe

Abstract

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