International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

The Effects of Capital Structure Complexity on Adjustment Speed Across Business Cycles

Document Type : Original Article

Authors
Mahdi Mahdian Rizi 1
Mahdi Madanchi Zaj 2
Hossein Panahian 3
Hamidreza Kordlouie 4
1 PhD student, Department of Finance, kas.c. , Islamic Azad University, Kashan, Iran
2 Assistant Professor, Department of Management, CT.C. , Islamic Azad University, Tehran, Iran
3 Professor, Department of Accounting and Management, kas.c. , Islamic Azad University, Kashan, Iran
4 Professor, Department of Finance, SR.C. , Islamic Azad University, Tehran, Iran
10.22034/ijfma.2026.78891.2327
Abstract
In constrained emerging markets, capital structure complexity remains a critical yet under‑explored determinant of financial flexibility. This study examines how three complexity dimensions—number of components (NumComp), concentration (HHI), and maturity dispersion (DMD)—interact with business cycles in shaping the speed of adjustment (SOA). Using two-step System GMM for 143 non-financial firms listed on the Tehran Stock Exchange (2016–2021) and Hamilton’s (1989) Markov-switching filter, we analyze the “concentration–flexibility” nexus. Contrary to developed markets where variety typically underpins flexibility, results indicate that in Iran’s volatile, bank‑dominated system, financing concentration is the key adjustment accelerator. Specifically, higher HHI—reflecting deep relationships with core creditors—noticeably increases adjustment speeds in expansions, whereas instrument quantity and maturity dispersion have no robust effect. Complementary K-means clustering reveals structural fragmentation: equity and trade credit dominate in expansions, while firms shift to loan-dependent clusters in recessions, highlighting a “flight to banking relationships” under stress. These findings challenge the “more is better” view, suggesting that in constrained systems, strategic relationship depth offers greater agility than diversification.
Keywords
Capital structure complexity
Speed of adjustment
Business cycle
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