The pecking order theory of corporate leverage is tested against the static tradeoff theory of corporate leverage, using a broad cross-section of US firms over the period 1980-1998. A derivation of the conditional target adjustment framework is provided as a better empirical test of mean...

The empirical implications of the trade-off theory, the market timing theory, and Welch's (2003) theory of capital structure are examined using aggregate US data for 1952 to 2000. There is a long-run leverage ratio to which the system reverts. Deviations from that ratio help to predict debt...

We examine corporate investment spending around the asset price bubble in Japan in the late 1980s and make three contributions to our understanding of how stock valuations affect investment. First, investment responds significantly to nonfundamental components of stock valuations during asset...

Asymmetric information models suggest that a borrower's choice of debt maturity depends on its private information about its default probabilities, i.e., borrowers with favorable information prefer short-term debt while those with unfavorable information prefer long-term debt. We test this...

We study whether bestowing CEO and chairman duties on one individual affects a board's decision to dismiss an ineffective CEO. The results show that the sensitivity of CEO turnover to firm performance is significantly lower when the CEO and chairman responsibilities are vested in the same...

This paper examines investment spending of Japanese firms around the 'asset price bubble' in the late-1980s and makes three contributions to our understanding of how stock valuations affect investment. First, corporate investment responds significantly to nonfundamental components of stock...

The U.S. defense industry provides a natural experiment for examining how changes in growth opportunities affect the level and structure of corporate debt. Compared with other firms, the growth opportunities of defense firms increased substantially during the Reagan defense buildup of the early...

We study whether bestowing CEO and chairman duties on one individual affects a board's decision to dismiss an ineffective CEO. The results show that the sensitivity of CEO turnover to firm performance is significantly lower when the CEO and chairman responsibilities are vested in the same...

We examine whether differences in legal protection affect the size, maturity, and interest rate spread on loans to borrowers in 48 countries. Results show that banks respond to poor enforceability of contracts by reducing loan amounts, shortening loan maturities, and increasing loan spreads....

We use a real options approach to evaluate the performance of proxy variables for a firmiquest;s investment opportunity set. The results show that on a relative scale, the market-to-book assets ratio outperforms all other proxy variables that we investigate. It has the highest information...