Central Banking

Bank of Portugal paper explores optimal capital structure for businesses

bancodeportugal

The speed at which firms achieve convergence to their optimal debt ratio is much faster than previously thought, says a working paper from the Bank of Portugal.

Researchers Paula Antão and Diana Bonfim studied a variety of firms of all sizes in the Portuguese economy and conclude that smaller firms achieve convergence faster than larger firms, while firms that are currently behind their target leverage ratio are slower to reach convergence than those that have a symmetrical departure point.

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