Suppose that you would like to analyze firms' capital structure and you want to analyze the...

  

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Suppose that you would like to analyze firms' capital structure and you want to analyze the firm's 'speed of adjustment'. Your dependent variable is the firm's Leverage Ratio in year t+1. Your regression has various regressors and you can observe these for each firm in each year. Consider the following output (in the table below). Numbers in standard font are regression coefficients and numbers in parentheses are t-statistics. Now consider the following questions: a. What does the regression tell you about the 'speed of adjustment'? b. What changes, if any, would you make to the regression specification? If you would not make any changes, please state so. c. Assume that the regression output is valid. What capital structure theory (or theories) are the results consistent with and why? Suppose that you would like to analyze firms' capital structure and you want to analyze the firm's 'speed of adjustment'. Your dependent variable is the firm's Leverage Ratio in year t+1. Your regression has various regressors and you can observe these for each firm in each year. Consider the following output (in the table below). Numbers in standard font are regression coefficients and numbers in parentheses are t-statistics. Now consider the following questions: a. What does the regression tell you about the 'speed of adjustment'? b. What changes, if any, would you make to the regression specification? If you would not make any changes, please state so. c. Assume that the regression output is valid. What capital structure theory (or theories) are the results consistent with and why?

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a The results of the regression show that the speed of adjustment for firms capital structures is po... View the full answer