Tests of the static trade-off theory that posits that firms movetowards the optimum capital structure necessitate a jointhypothesis test - whether firms adjust toward target leverage, andwhether the proxy used for target leverage is the true targetleverage. Prior studies use the time-series mean...

Tests of the static trade-off theory that posits that firms move towards the optimum capital structure necessitate a joint hypothesis test - whether firms adjust toward target leverage, and whether the proxy used for target leverage is the true target leverage. Prior studies use the time-series...