Some of empirical studies, with focus on firm-specific characteristics, find that
firms encounter with different adjustment costs which could be affective on their
speed of adjustment toward their target leverage. This paper has examined the
effect of firm-specific characteristics on speed of capital structure adjustment in
the listed companies in Tehran Stock Exchange (TSE). The studied sample of the
research includes 115 firms in the period of 2003-2012. We used partial
adjustment model and generalized method of moments (GMM) estimator to
estimating the speed of adjustment. We find that studied firms adjust relatively
fast towards their target leverage and these results are consistent with trade-off
theory. Also, we find that firms with low growth opportunities and small size
adjust faster than those with the opposite characteristics.
