Herding Behavior as a Factor of Choice of Capital Structure by Managers

This study explores how Russian companies' financing decisions are influenced by herd behavior, where managers tend to mimic others rather than make independent choices. Using data from the SPARK database covering the period from 2019 to 2023, we aim to understand how herd behavior relates to capital structure decisions among non-financial Russian firms. Through quantitative analysis, we examine the impact of herd behavior on capital structure decisions in a sample of 1808 Russian companies across manufacturing; wholesale and retail; services; science, art and healthcare; transport, and real estate and construction. We measure the debt ratio, representing total debt relative to total assets, as our dependent variable, while considering lagged debt ratio as the primary independent variable. Additionally, we include control variables such as profitability and asset tangibility to understand their influence on capital structure decisions. Our study anticipates a positive relationship between lagged mean debt ratio and each sector's capital structure, indicating the presence of herd behavior in Russian firms' financing decisions. Moreover, we aim to uncover how profitability, firm size, and asset tangibility impact capital structure choices, providing valuable insights into firms' financing behaviors. Ultimately, this research contributes to our understanding of how herd behavior shapes capital structure decisions in the Russian corporate landscape, offering implications for both academic research and practical applications in finance and management. Key words: herd behavior, capital structure, managerial decisions, non-financial companies, debt ratio.