Capital structure speed of adjustment heterogeneity across zero leverage and leveraged European firms

This paper investigates whether leveraged and zero-leverage firms pursue or not a debt target level and, if so, how fast they adjust to that target. We also investigate the influence of firms’ policy on capital structure speed adjustment (SOA) changes with different financial systems, macroeconomic conditions, constraints flexibility levels. Using dynamic panel fractional estimator sample European listed for 1995–2016 period, we find both actively ratio. that, in general, display significantly higher SOA than (27.6 % vs. 22.1 %), only two exceptions: there are no significant differences when analysis is restricted financially constrained firms; during 2008 crisis adjusted faster (46.8 %) (25.6 relative non-crisis years (21.6 %).