A causal approach to test empirical capital structure regularities
Capital structure theories are often formulated as causal narratives to explain which factors drive financing choices. These narratives are usually examined by estimating cross–sectional relations between leverage and its determinants. However, the limitations of causal inference from observational...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
KeAi Communications Co., Ltd.
2022-11-01
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| Series: | Journal of Finance and Data Science |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2405918822000125 |
| _version_ | 1797903376311123968 |
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| author | Simone Cenci Stephen Kealhofer |
| author_facet | Simone Cenci Stephen Kealhofer |
| author_sort | Simone Cenci |
| collection | DOAJ |
| description | Capital structure theories are often formulated as causal narratives to explain which factors drive financing choices. These narratives are usually examined by estimating cross–sectional relations between leverage and its determinants. However, the limitations of causal inference from observational data are often overlooked. To address this issue, we use structural causal modeling to identify how classic determinants of leverage are causally linked to capital structure and how this causal structure influences the effect-estimation process. The results provide support for the causal role of variables that measure the potential for information asymmetry concerning firms’ market values. Overall, our work provide a crucial step to connect capital structure theories with their empirical tests beyond simple correlations. |
| first_indexed | 2024-04-10T09:31:55Z |
| format | Article |
| id | doaj.art-57b954d394ef48638cdaa284cff72cea |
| institution | Directory Open Access Journal |
| issn | 2405-9188 |
| language | English |
| last_indexed | 2024-04-10T09:31:55Z |
| publishDate | 2022-11-01 |
| publisher | KeAi Communications Co., Ltd. |
| record_format | Article |
| series | Journal of Finance and Data Science |
| spelling | doaj.art-57b954d394ef48638cdaa284cff72cea2023-02-19T04:26:25ZengKeAi Communications Co., Ltd.Journal of Finance and Data Science2405-91882022-11-018214232A causal approach to test empirical capital structure regularitiesSimone Cenci0Stephen Kealhofer1Leonardo Centre, Imperial College Business School, Exhibition Rd, London SW7 2BX, UK; Corresponding author.Blackstone Credit, San Francisco, 101 California St., CA, 94111, USACapital structure theories are often formulated as causal narratives to explain which factors drive financing choices. These narratives are usually examined by estimating cross–sectional relations between leverage and its determinants. However, the limitations of causal inference from observational data are often overlooked. To address this issue, we use structural causal modeling to identify how classic determinants of leverage are causally linked to capital structure and how this causal structure influences the effect-estimation process. The results provide support for the causal role of variables that measure the potential for information asymmetry concerning firms’ market values. Overall, our work provide a crucial step to connect capital structure theories with their empirical tests beyond simple correlations.http://www.sciencedirect.com/science/article/pii/S2405918822000125C1C4G3 |
| spellingShingle | Simone Cenci Stephen Kealhofer A causal approach to test empirical capital structure regularities Journal of Finance and Data Science C1 C4 G3 |
| title | A causal approach to test empirical capital structure regularities |
| title_full | A causal approach to test empirical capital structure regularities |
| title_fullStr | A causal approach to test empirical capital structure regularities |
| title_full_unstemmed | A causal approach to test empirical capital structure regularities |
| title_short | A causal approach to test empirical capital structure regularities |
| title_sort | causal approach to test empirical capital structure regularities |
| topic | C1 C4 G3 |
| url | http://www.sciencedirect.com/science/article/pii/S2405918822000125 |
| work_keys_str_mv | AT simonecenci acausalapproachtotestempiricalcapitalstructureregularities AT stephenkealhofer acausalapproachtotestempiricalcapitalstructureregularities AT simonecenci causalapproachtotestempiricalcapitalstructureregularities AT stephenkealhofer causalapproachtotestempiricalcapitalstructureregularities |