Firm characteristics and speed of capital structure adjustment: evidence from Iran

Some of empirical studies, with focus on firm-specific characteristics, find that firms encounter with different adjustment costs which could be affective on their speed of adjustment toward their target leverage. This paper has examined the effect of firm-specific characteristics on speed of capital structure adjustment in the listed companies in Tehran Stock Exchange (TSE). The studied sample of the research includes 115 firms in the period of 2003-2012. We used partial adjustment model and generalized method of moments (GMM) estimator to estimating the speed of adjustment. We find that studied firms adjust relatively fast towards their target leverage and these results are consistent with trade-off theory. Also, we find that firms with low growth opportunities and small size adjust faster than those with the opposite characteristics