Technology firms and capital structure adjustment: Application of two-step system generalised method of moments

T. J. Gopane, T. Gandanhamo, J. B. Mabejane

Research output: Contribution to journalArticlepeer-review


The study asks whether technology firms adjust their capital structures towards predetermined targets, and if so, at what speed? Also, is there an intra-industry leverage-level effect? The study empirically evaluates the listed technology firms in South Africa s Johannesburg Stock Exchange (JSE). Methodologically, a generalised method of moments (GMM) is employed on 34 firms over 21 years (1999 2019), resulting in a sample size of 714 observations. The results show that technology firms adjust their debt-equity ratios towards target levels with speed above other industries at 45 to 57%. A comparison with prior research shows that this adjustment pace is consistent with the experience of technology firms in Asian emerging markets but differs markedly from that of developed economies. These results support the literature observation that technology is characterised differently in less developed economies, yet research on technology firms capital structure dynamics is scant. The results of this study should enlighten industrialists, investors, and policymakers involved with technology industries. Intuitively, the partial capital adjustment process should play an essential role in project financing decisions. Maintaining optimal capital adjustment speeds should lead to better industrial activity like maximised innovation and technology diffusion.

Original languageEnglish
Pages (from-to)34-54
Number of pages21
JournalApplied Econometrics
Publication statusPublished - 2023


  • Adjustment speed
  • Capital adjustment
  • Capital structure
  • Technology firms.

ASJC Scopus subject areas

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • General Economics,Econometrics and Finance


Dive into the research topics of 'Technology firms and capital structure adjustment: Application of two-step system generalised method of moments'. Together they form a unique fingerprint.

Cite this