Asymmetric peer effects in capital structure dynamics
by Hyun Joong Im
ARTICLE | Economics Letters | Vol. 176, 2019
Abstract
Using a semiparametric smooth-coefficient partial adjustment model, this study finds evidence for asymmetric peer effects on capital structure adjustment speeds between overlevered and underlevered firms. Overlevered firms’ adjustment speeds and peer firm shocks have a U-shaped relationship, while underlevered firms’ adjustment speeds monotonically increase with peer firm shocks.
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