Finance Governance and Dynamic Capital Structure

This paper studied the influence of finance governance on the adjustment speeds of capital structure under the below- and above-target debt level based on the data of listed companies for the period of 2010 to 2015. The finding of the empirical study show that finance governance does not significantly correlate with upward adjustment speeds when firms have below-target debt and that finance governance significantly negatively correlate with downward adjustment speeds when firms have above-target debt. The finding of this paper not only proves the disciplining effect of debt that the agency problem has influence on dynamic adjustment of capital structure, but also enriches the literature about dynamic capital structure, agency cost and corporate governance.