We seek economic interpretations for two well-known empirical regularities. First, it is well known that more profitable firms tend to have lower leverage ratios, a pattern driven by the preference on internal funds by these profitable firms. Some recent theoretical development has used...

The negative relation between the market-to-book ratio and leverage ratio is one of the most widely documented empirical regularities in the capital structure literature. Most related studies take this negative relation as given and debate about its economic interpretation. We show that firms...

This paper explores the importance of supply of capital for corporate financing. To identify this relation, we examine the impact of two exogenous events, entry to the EU and the adoption of Euro, which caused shifts in equity and credit markets during European integration. Following membership...

This study uses firm level survey data to assess whether the capital structure theory is portable to small firms in developing countries and whether country characteristics play a role in their financing decisions. Using a sample of both small companies and large firms from 24 developing...