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August 21, 2025Journal of risk and financial managementOpen Access

Fundamental Risk and Capital Structure Adjustment Speed: International Evidence

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Authors

DRDilesh RawalJMJitendra MahakudLAL Maheswar Rao Achary

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Overview

Analysis shows fundamental risk influences leverage adjustment speed in firms, suggesting institutional quality improvements can enhance capital efficiency.

Key Points

  • A reduction in country-specific fundamental risk increases firms' leverage adjustment speed significantly.
  • A one standard deviation decrease in fundamental risk leads to a 12.79% increase in SOA for book leverage.
  • Using machine learning, the study corroborates findings on the impact of operational efficiency and political stability.
  • Insights stress the importance of improving regulatory frameworks to reduce financing frictions in capital markets.

Cite This Study

Rawal et al. (2025) studied this question.

synapsesocial.com/papers/68af56f4ad7bf08b1eadcff8https://doi.org/10.3390/jrfm18080468
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