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http://dx.doi.org/10.5762/KAIS.2017.18.6.110

Further Evidence on the Existence of an Inter- and Intra-Industry Optimal Capital Structure for the KOSPI-listed Firms in the Korean Capital Market  

Kim, Hanjoon (Division of Business Administration, Hoseo University)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.18, no.6, 2017 , pp. 110-118 More about this Journal
Abstract
This study investigated empirically one of the controversial subjects in modern finance, in that there is an optimal level of capital structure for KOSPI-listed firms in the Korean capital market. Given the major theories on the capital structure, such as Myers' pecking order, trade-off, and agency cost ones, this study applied an analysis of covariance models in parametric and non-parametric statistical methods. In particular, two covariates to control for the possible effects of trade-off and agency cost, were employed separately in each corresponding model, while the other proxy for pecking order rationale was adopted in previous research [1] to conduct inter- and intra-industry analyses. Based on the outcomes obtained from the study, it was demonstrated empirically that there are optimal capital structures for firms in the sample industries at the inter-industry level, whereas statistical differences indicating non-existence of an optimal point, were revealed within the industry. Accordingly, these findings suggest a new vision to potential investors that firms in the domestic market may have financial opportunities to increase their value by gradually adjusting the leverage ratios in terms of the intra-industry perspective.
Keywords
Analysis of Covariance; Inter-Industry Analysis; Intra-Industry Analysis; Korean Capital Market; Optimal Capital Structure;
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Times Cited By KSCI : 5  (Citation Analysis)
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