This paper examines the interaction between the firm's production and financing decisions, focusing on the specificity of its assets and on the flexibility of its production technology. The paper shows that production flexibility increases potential tax shields from debt and lowers expected...

This study examines (leverage) underinvestment and overinvestment hypotheses, taking into account whether growth is anticipated or unanticipated and controlling for potential reverse causality. This study sheds light on the following question: Does financial leverage affect the firm's ability to...