Leverage variation and its relation to the industry characteristics

• Autor(a) principal: Moreira, Pedro José Silva Lino de Oliveira
• Data de Publicação: 2017
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/22123
• topic: Domínio/Área Científica::Ciências Sociais::Economia e Gestão

In this study we have focused on North American companies from 1974 until 2015. Based on this sample, it was our objective, to better understand the three dimensions of capital structure variation: within-firm, within-industry and between industries. We concluded that most of the variation in financial structures arises from within-industries rather than between industries. Additionally, in the period considered, within-industry variation was interpreted as the one that showcased the greatest increase, (43%) Taking into consideration these intriguing results, we decided to regress leverage ratios on industry leverage medians, which confirmed the little importance of industry in explaining firm financial structure. In order to better understand how leverage is organized within the different industries, we developed the concept of “level” and “consistency”, reaching a new stylized fact in this area of research, by concluding that industries which portray the highest or the lowest capital structures’ dispersion tend to remain this way for long periods of time. Finally, we proved that capital structure variation is associated to firms in industries with shorter longevities, higher probabilities of default, as well as, to higher leverage ratios.