Most of the previous studies have analyzed the validity of Tradeoff and Pecking Order in the context of firms that are financially sound, not under financial distress. This study departs from that approach and analyzes the firms in financial distress to find empirical evidence on the issue as to...

Building upon the framework of the tradeoff model of capital structure and motivated by the equity market timing theory, we examine whether equity misvaluation is a source of adjustment “costs” that will affect a firm’s leverage adjustment speed toward target. We also investigate whether...