Is the Capital Structure Stable in Brazil?

Abstract

Purpose: This paper’s objective is to analyze whether the capital structure of Brazilian publicly traded companies remained stable over the last twenty years. Originality/value: The paper is focused on the Brazilian capital market, in which there is a lack in the literature about the study of the leverage behavior and its immaturity, where factors related to the companies and characteristics in contracting leverage alter the demand of credit. Design/methodology/approach: To achieve its objective, initially a graphical analysis of market and book debt evolution was carried out, and a GMM-Sys regression model through panel data was estimated to identify the stability of leverage along time. Findings: The results indicate a reduction of the market leverage with higher statistical significance after 2008, indicating, both in the graphic and the regression analysis, that the use of debt was unstable in the first period analyzed (1995-2007), behavior not observed during the second period (2008-2015) when analyzed market measures in which capital structure stability was prevalent, with considerable reduction of corporate leverage, otherwise, book measures of leverage would have shown a stability trend in leverage patterns. The principal determinants of the capital structure were the tax benefits (book debt) and the size (market debt), supporting trade-off theory.

Preferences, sources, and conditionals: a new approach to testing financing decisions

“…In this type of approach, with variations, evidence could be identified that Brazilian companies follow the POT, just as in Bastos and Nakamura (2009), Cardoso andPinheiro (2020), andCorrea et al (2013). Tristão and Sonza (2019), in turn, identified results consistent with the search for an optimal indebtedness level and Nakamura et al (2007) and Oliveira et al (2013) identified mixed results, which did not allow the corroboration of any theory, based on the Brazilian companies under analysis.…”

The Volatility of Capital Structure in Brazil—An Empirical Analysis

“…In Brazil, there is a study by Tristão & Sonza (2019), in which companies listed on the BolsaBalcãoBrasil (B3) from 1995 to 2015 were analyzed. The conclusion reached is that there is also instability in leverage.…”