If the primary purpose of raising debt levels was to finance growth opportunities, then higher debt levels would signal greater post-payout returns on assets but contain no information about firm leverage. Using annual data in real terms for more than 5,400 public US non-financial firms from...

Because bankruptcy is costly for employees, theoretical studies argue that firms with higher leverage have to pay their employees higher wages. In this paper we empirically test this prediction. We find that firm leverage is positively related to the wages of employees, both in the United States...

The static tradeoff theory of capital structure predicts that firms aim to approach a target debt ratio. The theory provides several firm characteristics that determine this target ratio. In contrast, the pecking order model rejects a target debt ratio, because firms are expected to finance...