This paper uses the GMM estimator with target adjustment to examine the dynamics of capital structure in 28 countries. Firms are found to adjust their capital structures slowly to the target level indicating the existence of adjustment costs in the process of adjusting the debt level toward its target. Our results provide evidence that firms in common law countries, and in countries with better stock market development or liquidity, carry lower debt ratios indicating that the lower information asymmetry in these countries enhances the We find a positive relationship between corruption perception index. These results are found to vary among industry sectors in terms of the effect of these factors on the use of total and long-term debt ratios.