FINANCIAL CRISIS AND CAPITAL STRUCTURE: PERSPECTIVES FROM AN EMERGING MARKET ECONOMY

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Abstract

World economies experienced one of the worst recessions in recorded history in 2008. South Africa, as an emerging economy, did not escape the negative effects of the global recession, and, as a result, experienced its first recession in almost two decades. During a recession, firms may need to adjust their capital structure in response to the adverse circumstances. The purpose of this study was to investigate the effect of the South African recession on the capital structure of firms listed on the Johannesburg Securities Exchange (JSE). Panel data methodology was used for this study. The results indicate that the 2008-2009 South African recession did have a significant impact on the capital structure of South African firms and that financial managers actively managed their capital structure to adapt to the new environment and circumstances they were exposed to.

Keywords: Recession, Capital Structure, South Africa, Firm Characteristics, Emerging Economy

How to cite this paper: De Vries, A. (2013). Financial crisis and capital structure: perspectives from an emerging market economy. Corporate Ownership & Control, 11(1-9), 789-799. https://doi.org/10.22495/cocv11i1c9art3