The Impact of Stock Prices on Capital Structures: A Study on the German Stock Market

Abstract: This thesis analyzes the corporate rebalancing behavior of German publicly listed firms subsequent to equity price shocks. The examined period (1990-2012) includes a total sample of 2,154 firm-years. It is found that German firms do not counteract stock induced changes in market-based capital ratios in the short run; whereas managerial rebalancing activity gradually gains importance in the long-term perspective. This behavior is largely in accordance with referential studies on the U.S. and the European stock markets. Further, a life-cycle extension of the applied research model has identified diverging rebalancing intensities across dissimilar corporate maturity classes. It was found, that those differences may be partly explained by respective adjustment cost levels.