On Corporate Capital Structure Adjustments

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Recent research has examined asymmetries in firms’ adjustments toward target leverage. Assuming firms mainly adjust their debt levels, Byoun (2008) finds that firms adjusting most quickly possess two important characteristics: above-target debt and a financing surplus. Using alternative models allowing for adjustments in both debt and total assets, we still find evidence of asymmetries in leverage adjustments, but that firms adjusting fastest have above-target leverage and a financing deficit. Our paper shows how alternative assumptions about leverage dynamics may lead to different conclusions about target adjustment behavior.
Original languageEnglish
Pages (from-to)56-63
Number of pages7
JournalFinance Research Letters
Publication statusPublished - 2015


  • Capital structure; Dynamic trade-off theory; Partial adjustment model; Asymmetric adjustment; Model specification


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