Our paper documents procyclical behavior between capital utilization and short-term debt. This strong positive relationship persists even when we control the regressions for firm size, profits, and growth, attesting to the robustness of our findings. In addition, our analysis of the time series...

We develop a dynamic capital structure model where interest rates are stochastic and driven by three state variables: level, slope, and curvature of the yield curve in an arbitrage-free Nelson-Siegel model. Our analysis suggests that the yield-curve factors are critical determinants of the...

We show that deviations from the firm's target leverage are priced in the cross-section of stock returns and that the relationship between these quantities is nonlinear. The concave nonlinear relationship between deviation from the target leverage and next-period return is strong during economic...