Capital Structure Choice of Retail Companies in Developed Financial Markets

A great number of empirical research papers have investigations in relation to capital structure. However, there is no research towards capital structure determinants of retailers. Retail is seen as a quite attractive industry to study. P&L and balance sheet are more visible and, hence, there are less troubles caused by valuation comparing with companies having business focus on services or manufacturing. Also, retail firms provide more opportunities to compare them due to industry specifics. This degree paper provides the analysis of capital structure determinants within a dynamic panel data set of 60 retail companies in the USA, Canada and Europe dating 2010-2015. Here we examine support for the trade-off theory and it partially found through the analysis. There is a dynamic partial adjustment model estimated with a two-step system GMM estimator provided by Blundell-Bond. The results obtained suggest that retailers adjust towards their target capital structure with 41.39% level of speed annually. Overleveraged firms adjust faster than underleveraged and the whole sample suggests the adjustment costs arising from deviating from target to be high. Industry characteristics appear to be significant in terms of influencing on adjustment speed level.