An empirical study on the indebtedness of Brazilian companies

he aim of this paper is to provide insights on the determinants of the indebtedness of Brazilian companies. Initially, this paper replicates the main empirical tests on the literature. The reduced explanatory power of the results led us to propose a new methodology using the GMM method of Blundell and Bond (1998), which points out companies with higher roportions of fixed assets on total assets present higher indebtedness. Our results indicate that estimation of the equations implied by the target leverage model tends to generate seriously biased estimates if the endogeneity of the covariates is not explicitly considered in the analysis.