Cross-Country Determinants of Capital Structure Choice: Evidence from Russian and American Publicly Traded Firms

The study focuses on analyzing the factors that determine the capital structure of publicly traded companies in Russia and the United States, as well as examining cross-country differences both in the influence of these factors on the target capital structure and in the speed of adjustment (SoA) of public companies to it. The academic novelty of this research in the field of capital structure analysis lies in its focus on comparing two countries characterized by vast differences in economic development histories (a recently transitioned from centrally planned to market-oriented economy in Russia and a highly developed market economy in the United States) and current levels of capital markets development. To assess the influence of factors on capital structure and the values of SoA to its target levels, a two-stage Partial Adjustment Model (PAM) approach was used, including static and dynamic models on panel data. To address endogeneity and achieve unbiased efficient estimates, the Generalized Method of Moments (GMM) was employed in the PAM model. Regression estimations were conducted on samples of Russian and American companies with further differentiation of them into subgroups (under- and overleveraged relatively to the target capital structure). The study's results confirm statistically significant cross-country differences in the influence of the examined factors. Additionally, the research found that the financial behavior of companies in both countries supports the dynamic trade-off theory, although US companies exhibit a statistically higher speed of capital structure adjustment than Russian companies. More detailed results and conclusions of the research were discussed further in the paper.