Capital Structure Adjustment in ASEAN-6: Evidence and Inferential Limits

Agung Iman Setyawan

doi:10.61255/jeemba.v4i5.1720

Authors

Agung Iman Setyawan Universitas Gadjah Mada, Indonesia

DOI:

https://doi.org/10.61255/jeemba.v4i5.1720

Keywords:

Capital structure, Speed of Adjustment, System GMM, Cluster-Robust Inference, ASEAN

Abstract

Purpose – This study estimates the speed of book-leverage adjustment among non-financial listed firms in the six largest ASEAN economies, and examines whether it varies with economic uncertainty, with institutional quality, and across the pandemic period.

Design/methodology/approach – From an initial panel of 53,892 firm-year observations covering 4,689 firms from 2010 to 2024, we estimate a dynamic partial-adjustment model by system GMM on a final estimation sample of 32,264 observations from 3,816 firms, with wild cluster bootstrap inference over six country clusters.

Finding/Results – Firms close about fifteen per cent of the gap to target each year, a half-life of 4.4 years, stable from 0.132 to 0.205 across the instrument configurations that pass the diagnostics, four target specifications, six leave-one-country-out samples, and six country subsamples. Adjustment was four to five percentage points faster in 2020 and 2021, with no pre-trend, no difference across pandemic-exposure sectors, and a randomisation p-value of 0.013. The uncertainty effect is not estimated with a stable direction, and institutional moderation is not identified.

Originality/Value – The study shows how country-level effects reported confidently elsewhere become fragile when identification, and not only inference, is examined with six clusters. The market-leverage model remains unresolved.

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