An analysis of the capital structure determinants and financing behaviour of New Zealand firms : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Manawatu, New Zealand
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Date
2011
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Massey University
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Abstract
This thesis investigates the determinants of the capital structure of New Zealand firms and the
financing behavior of these firms. The first essay in the thesis examines the relationship between
the capital structure of firms and their product markets. Results suggest that New Zealand firms
use debt to compete more aggressively in their product markets, even though this strategy comes
at a cost of lower relative-to-industry profitability. A possible explanation for this behaviour is
the more competitive trading environment that, due to market deregulation, has developed in
New Zealand over the last 25 years. The second essay in the thesis looks at the capital structure
choices made by New Zealand firms, why these firms choose particular capital structures and
how their structures change over time. It presents evidence of consistent trends in the financing
policies of firms, and in the factors that influence those policies. The final essay in the thesis
examines factors that determine how quickly New Zealand firms adjust toward target capital
structures. The main findings are that speeds of adjustment vary across New Zealand industries,
New Zealand firms adjust towards a target debt ratio more quickly when the firms are
experiencing a financial deficit, and firms’ financing policies influence adjustment speed.
Description
Link to published version of chapter 2: Smith, D.J., Chen, J. & Anderson, H.D. (in press). The relationship between capital structure and product markets: Evidence from New Zealand. Review of Quantitative Finance and Accounting. doi: 10.1007/s11156-010-0216-x
Keywords
Corporations, Finance, Capital investments, New Zealand, Firms