With zero capital structure rebalancing costs, dynamic tradeoff theory predicts that firms stay at their leverage targets with more profitable firms staying at higher leverage. This prediction is rejected by the robustly negative correlation between leverage and profitability. When rebalancing...

This paper analyzes the effect of corporate debt offerings on stock prices. Straight debt offerings have non-positive price effects, while convertible debt offerings have significantly negative effects. Public utility mortgage (non-convertible) bond offerings have marginally negative effects,...