How and When Do Firms Adjust Their Capital Structures toward Targets?- Manager Debt Tendency

[[abstract]]Previous study did not explore the manager’s debt tendency to influence the target capital structure. This study wants to defines “Debt Tendency Coefficient” to explore differences of Taiwan managers’ debt tendency and to verify the existence of target capital structures. After knowing existence of debt tendency coefficient, this study will use quantile regression alternative to general regression to estimate the target debt ratio. In order to understand the Taiwanese managers towards target capital structure adjustment process and characteristics. If firms adjust their capital structures toward targets, and if there are adverse selection costs associated with asymmetric information, Byoun(2008) suggested a financing needs-induced adjustment framework to examine the dynamic process by which firms adjust their capital structures. And he found that most adjustments occur when firms have above-target (below-target) debt with a financial surplus (deficit). Byoun (2008) used the U.S. data and adopted ordinary least squares estimators as all the company's target debt ratio estimators. He received the same results with the prior forecast. The samples were classified as moderate tendency to borrow enough samples sufficient to ignore the use of ordinary least squares estimator bias resulting from impact of the financing needs-induced adjustment framework. However, we initially found that there are many managers of low debt tendency in our sample of Taiwanese listed companies, unlike the U.S. data that is most of the sample of moderate debt tendency. At this point, if the use of ordinary least squares estimators as all the company's target debt ratio estimator may occur very serious estimated bias of target debt ratio ,it lead validation of" financing needs-induced adjustment framework " to be unable do the right observation. As such, we plan to switch to quantile regression estimator, as all of the company's target debt ratio estimator to improve the target debt ratio is estimated bias, with a view to the satisfaction of the successful predictions in advance, and found that the capital structure adjustment framework under Taiwan's managers of unique low-debt tendency