The theoretical model developed in this paper implies that equity value does not always increase with a firm's external growth opportunities, as suggested by the Gordon dividend growth model. There is a positive (negative) relation when the coefficient of constant relative risk aversion of a...

This study analyzes whether corporate financing policies of the US industrial firms have depended on borrowing costs during the last forty years. The results show that the impact is either zero or slightly negative. Even in the latter case, the results are economically insignificant. Overall,...