Heterogeneity in Speed of Adjustment using Finite Mixture Models
Many empirical analyses of firms' speed of leverage adjustment (SOA) impose a strong constraint: an average SOA is estimated for all firms in a sample. We demonstrate the usefulness of finite mixture models (FMM) in corporate finance by analysing estimates of firms' SOA. Applying FMM to a...
| Main Authors: | , , , |
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| Format: | Journal Article |
| Language: | English |
| Published: |
Elsevier
2021
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| Subjects: | |
| Online Access: | http://hdl.handle.net/20.500.11937/88779 |
| _version_ | 1848765081206128640 |
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| author | Durand, Robert Greene, William Harris, Mark Khoo, Joye |
| author_facet | Durand, Robert Greene, William Harris, Mark Khoo, Joye |
| author_sort | Durand, Robert |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | Many empirical analyses of firms' speed of leverage adjustment (SOA) impose a strong constraint: an average SOA is estimated for all firms in a sample. We demonstrate the usefulness of finite mixture models (FMM) in corporate finance by analysing estimates of firms' SOA. Applying FMM to a sample of US firms during 1972–2017, we find five distinct types of firm behaviours, each with its own SOA. Moreover, the same explanatory variables can have quite differing effects across the groups. We also offer the applied researcher a battery of validation techniques that can be used in a FMM context. FMM should be a standard part of finance researchers’ tool-kits. |
| first_indexed | 2025-11-14T11:29:34Z |
| format | Journal Article |
| id | curtin-20.500.11937-88779 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T11:29:34Z |
| publishDate | 2021 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-887792022-06-27T06:52:09Z Heterogeneity in Speed of Adjustment using Finite Mixture Models Durand, Robert Greene, William Harris, Mark Khoo, Joye Social Sciences Economics Business & Economics Speed of leverage adjustment Finite mixture models Dynamic panel data OPTIMAL CAPITAL STRUCTURE PANEL-DATA MODELS CORPORATE GOVERNANCE STRUCTURE DECISIONS DYNAMIC-MODELS HEALTH-CARE COMPONENTS EQUITY INFORMATION ESTIMATORS Many empirical analyses of firms' speed of leverage adjustment (SOA) impose a strong constraint: an average SOA is estimated for all firms in a sample. We demonstrate the usefulness of finite mixture models (FMM) in corporate finance by analysing estimates of firms' SOA. Applying FMM to a sample of US firms during 1972–2017, we find five distinct types of firm behaviours, each with its own SOA. Moreover, the same explanatory variables can have quite differing effects across the groups. We also offer the applied researcher a battery of validation techniques that can be used in a FMM context. FMM should be a standard part of finance researchers’ tool-kits. 2021 Journal Article http://hdl.handle.net/20.500.11937/88779 10.1016/j.econmod.2021.105713 English Elsevier restricted |
| spellingShingle | Social Sciences Economics Business & Economics Speed of leverage adjustment Finite mixture models Dynamic panel data OPTIMAL CAPITAL STRUCTURE PANEL-DATA MODELS CORPORATE GOVERNANCE STRUCTURE DECISIONS DYNAMIC-MODELS HEALTH-CARE COMPONENTS EQUITY INFORMATION ESTIMATORS Durand, Robert Greene, William Harris, Mark Khoo, Joye Heterogeneity in Speed of Adjustment using Finite Mixture Models |
| title | Heterogeneity in Speed of Adjustment using Finite Mixture Models |
| title_full | Heterogeneity in Speed of Adjustment using Finite Mixture Models |
| title_fullStr | Heterogeneity in Speed of Adjustment using Finite Mixture Models |
| title_full_unstemmed | Heterogeneity in Speed of Adjustment using Finite Mixture Models |
| title_short | Heterogeneity in Speed of Adjustment using Finite Mixture Models |
| title_sort | heterogeneity in speed of adjustment using finite mixture models |
| topic | Social Sciences Economics Business & Economics Speed of leverage adjustment Finite mixture models Dynamic panel data OPTIMAL CAPITAL STRUCTURE PANEL-DATA MODELS CORPORATE GOVERNANCE STRUCTURE DECISIONS DYNAMIC-MODELS HEALTH-CARE COMPONENTS EQUITY INFORMATION ESTIMATORS |
| url | http://hdl.handle.net/20.500.11937/88779 |