Zrinka Lovretin Golubić, Ena Pecina, Zrinka Orlović
{"title":"Exploring Herding in Capital Structure Choices: Insights From Developed European Economies","authors":"Zrinka Lovretin Golubić, Ena Pecina, Zrinka Orlović","doi":"10.1002/jcaf.22789","DOIUrl":null,"url":null,"abstract":"<p>This paper investigates the potential influence of herd behavior on companies' capital structure choices. While existing capital structure theories often overlook psychological and social factors, this study explores the role of herding, an area under-examined in the literature. The analysis is conducted on publicly listed companies across multiple developed European markets, including the United Kingdom, France, Germany, and Switzerland, over the period from 2000 to 2023. Using the cross-sectional absolute deviation (CSAD) methodology, the results reveal that herd behavior is more pronounced in specific countries and sectors. The United Kingdom exhibits the most prominent herding, particularly in materials, industrials, consumer discretionary, communication services, and information technology sectors, often centered around industry mean capital structures. Switzerland shows herding in health care and industrials, possibly driven by demographic and technological shifts, while France sees herding in the health care sector. Sectors like energy and consumer staples demonstrate resistance to herding, likely due to their need for stable, individualized capital structures. Additionally, the degree of financial leverage influences herding, with firms in sectors like consumer discretionary and communication services aligning with industry benchmarks to avoid negative market perceptions. These findings enhance understanding of behavioral factors impacting capital structure decisions and offer implications for both academic research and practical policy.</p>","PeriodicalId":44561,"journal":{"name":"Journal of Corporate Accounting and Finance","volume":"36 3","pages":"378-393"},"PeriodicalIF":1.2000,"publicationDate":"2025-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/jcaf.22789","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Corporate Accounting and Finance","FirstCategoryId":"1085","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/jcaf.22789","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper investigates the potential influence of herd behavior on companies' capital structure choices. While existing capital structure theories often overlook psychological and social factors, this study explores the role of herding, an area under-examined in the literature. The analysis is conducted on publicly listed companies across multiple developed European markets, including the United Kingdom, France, Germany, and Switzerland, over the period from 2000 to 2023. Using the cross-sectional absolute deviation (CSAD) methodology, the results reveal that herd behavior is more pronounced in specific countries and sectors. The United Kingdom exhibits the most prominent herding, particularly in materials, industrials, consumer discretionary, communication services, and information technology sectors, often centered around industry mean capital structures. Switzerland shows herding in health care and industrials, possibly driven by demographic and technological shifts, while France sees herding in the health care sector. Sectors like energy and consumer staples demonstrate resistance to herding, likely due to their need for stable, individualized capital structures. Additionally, the degree of financial leverage influences herding, with firms in sectors like consumer discretionary and communication services aligning with industry benchmarks to avoid negative market perceptions. These findings enhance understanding of behavioral factors impacting capital structure decisions and offer implications for both academic research and practical policy.