While extensive research examines the relation between option incentives in executive compensation and risk-taking by managers, the impact of capital structure on this relationship has received little empirical attention. Prior work suggests that heightened managerial career concerns arising...

We analyze capital structure decisions of U.S. firms during 1905-1924, a period characterized by two shocks that provide a unique experiment for studying the primary determinants of financing choices: (i) the introduction of corporate and individual taxes, and (ii) the onset of World War I,...