Firm characteristics, corporate governance and capital structure adjustments: A comparative study of listed firms in Sri Lanka and India

This study explores the most important determinants of speed of adjustment (SOA) towards optimum/target capital structure of listed firms in Sri Lanka and India for the period 2003/04 to 2012/13. Ten independent variables comprising both firm specific and corporate governance factors have been tested using dynamic adjustment model. We find that firms in both countries partly adjust to an optimum capital structure over time. Furthermore, there are international differences existing in the significant determinants of capital structure adjustments between Sri Lanka and India.