Analyst Coverage And Dynamic Capital Structure Adjustment Of Firms

Capital structure decision-making is the most important issue in corporate finance.The research on capital structure in academia has gone from static to dynamic: on theoretical research,it has been from the theory of static capital structure to dynamic trade-off theory;on empirical research,it has been from decisive factors of static capital structure to influence of the dynamic adjustment of capital structure.The factors influencing the dynamic adjustment of capital structure are extended from corporate level to external environment level.Analysts serve as an important information intermediary and supervisory force in capital market.It’s necessary for us to examine their influence on the dynamic adjustment of corporate capital structure.Based on the data of listed companies of A-shares in China over the past 2006-2016 years,we draws the following conclusions.(1)Analyst coverage can significantly accelerate the speed of corporate capital structure adjustment and improve the effect of capital structure adjustment.Specifically,the more analysts follow,the faster the capital structure adjustment will be made,the smaller the actual capital structure deviates from the target level,and the better the capital structure adjustment effect will be.At the same time,we further examines the potential role of analyst coverage in improving the speed and effect of capital structure adjustment.(2)The relationship between analyst coverage and dynamic adjustment of capital structure is influenced by the direction of adjustment.Relative to the upward adjustment of capital structure,when the capital structure is downward adjustment,the impact of the number of analysts tracking on the pace of capital structure adjustment and effect is more pronounced.In addition,we replace the metrics of analyst coverage,overcome endogeneity issue,and the above conclusions still hold.