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Korean Journal of Financial Studies 2015;44(3):595-614.
Published online June 30, 2015.
Determinants of Capital Structure for Growth Firms: Corporate Bonds vs. Equity
Wonseok Woo, Hyung Suk Choi
성장기업의 자금조달에 관한 연구
우원석, 최형석
This paper tries to find the relationship between firm’s capital structure and growth and see if higher growth is associated with more financing from outside. According to the existing theories, companies prefer issuing bonds to issuing equity when they expect to enjoy high growth. Our research adds to the existing literature on capital structure as we focus on verifying the hypothesis that high growth firms prefer issuing bonds over equity when they need more capital. Another possible contribution is that our study examines whether this preference of bonds has actually led to the firm’s sustainable growth after controlling for main variable that was proved to influence a firm’s capital structure. Our sample is 2,346 Korean firms that were listed in KOSPI and KOSDAQ index between 1982 and 2013. The results of this study find that growth and debt ratio are positively related in general. Interestingly, firms with considerably low growth rate proved to have very high debt ratio. However after we controlled for other factors, the debt ratio of very low growth rate group is not statistically different from that of the remaining group. Other findings include that, although growth based on sales (i.e. quantitative growth) and growth based on operating income (i.e. qualitative growth) are positively associated with debt ratio, only the firms with high sales growth actually depended on external financing. This result may show that the firms that try to grow their size and sustain growth depend on external funding much more than the ones that focus on qualitative growth by paying more attention to, for example, improving managerial efficiency and cost reduction. This research did show that growth firms prefer issuing bonds to issuing equity, but this preference did not help firms sustain their growth rate after the financing.
Key Words: 대리인 이론,선호이론,양적 성장,자본구조,질적 성장,Agency Theory,Capital Structure,External Financing,Growth,Preference Theory
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