Examining the Impact of Dividend Policy and Financing Strategy on Capital Structure Adjustment Speed Using GMM
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

Examining the Impact of Dividend Policy and Financing Strategy on Capital Structure Adjustment Speed Using GMM

Document Type : Original Article

Authors
Maryam Sadat Tabatabaeian 1
zahra masoumi bilondi 2
1 Assistant Professor, Department of Accounting, PayameNoor University, Tehran, Iran
2 Assistant Professor of Accounting Department, Payame noor university, Tehran, Iran
10.22034/jse.2025.12586.2371
Abstract
Decisions related to capital structure and dividend policies play an important role in reducing conflicts of interest and increasing the value of the company. Investigating the factors affecting the speed of capital structure adjustment can help improve financial management and enhance the efficiency of the capital market. The purpose of this study is to investigate the effect of dividend policy and financing strategies on the speed of capital structure adjustment of companies and to provide a basis for optimizing the capital structure.This study examines how dividend policy and financing strategy affect the speed of capital structure adjustment among 175 firms listed on the Tehran Stock Exchange from 2014 to 2023, using a dynamic panel data model and the Generalized Method of Moments (GMM) estimator for robust analysis. The findings reveal two main insights: first, higher dividend payout ratios positively influence the speed of capital structure adjustment, indicating that firms with generous dividends adjust more quickly; second, excessive reliance on external financing negatively impacts this speed, suggesting slower adjustments for firms heavily dependent on outside funds. Overall, the research illustrates that effective dividend policies and reduced external financing needs enhance capital structure flexibility. These results advance financial theories, particularly pecking order theory, by emphasizing the strategic trade-offs in financing decisions. The implications are significant for firms optimizing their capital structures, guiding investors in identifying financially disciplined firms, and aiding regulators in fostering sustainable corporate financial practices.
Keywords
speed of capital structure adjustment
dividend policy
financing strategy
Subjects
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Quarterly Journal of Securities Exchange
Volume 19, Issue 75
Summer 2026
Pages 37-66