The global financial crisis and the speed of capital structure adjustment: Evidence from South Africa

Orientation: The 2007–2008 global financial crisis (GFC) represented a negative economic shock that financially constrained most firms globally.Research purpose: This study investigated the impact of GFC on firms’ speed adjustment (SOA) towards target leverage and whether this is good descriptor corporate financing for Johannesburg Stock Exchange (JSE)-listed nonfinancial firms.Motivation study: There limited evidence, if any, how affected SOA.Research approach/design method: used panel data drawn from 104 listed JSE partial model fitted with random-effects tobit estimator (RE tobit).Main findings: firstly documents JSE-listed had positive SOAs prior to, during post GFC. Secondly, SOA decreased period, meaning reduces all firms. Thirdly, readily eliminate their deviation spreads, as they have persistently higher than unconstrained Lastly, improved after GFC.Contributions/value-add: dynamic trade-off theory behaviour non-financial A SOAs.Practical/managerial implications: Managers should therefore maintain capital buffers in form cash reserves lines credit to reduce SOAs.