Our paper estimates the speed of moment adjustment based on the first difference of the lead (t 1) leverage levels (actual lead) and lag (t-1) leverage levels (actual lag) to the first difference of simulated lead (target) leverage levels and lag levels (actual lag leverage) for firm level data....

We empirically test the market timing theory of capital structure of issuing behavior of UK firms and find that the debt-equity choice decision is non-linear. In line with the previous literature, we find that managers are more likely to issue equity (debt) when equities are overvalued...