Speed of Adjustment of Dividend Payout and Capital Structure

The purpose of this study is to build and test a new econometric model of partial adjustment of capital structure and dividend payout to the target level. The objects of this study are mid and small capitalization companies which are placed in Developed Europe and United States. But these markets are taken separately from each other. In this paper, we would like to analyze some determinants for target capital structure as well as for target dividend payout. Moreover, the aim is to understand if there is a significant relationship between speed of adjustment for dividend payback and financial leverage. However, the results and model obtained from this study can be implemented only in developed capital markets, because of some specific variables which are important for emerging markets, but which are excluded for developed markets. It is expected that there is such relation between speeds of adjustment both in USA and in Europe, but it is also expected that the numerical value for SOA is different for both markets. It is also assumed that factors which are suitable for USA may and are suitable for Developed Europe. Overall, the results show that such relationship may exist, but there are some significant differences between these markets