Using a semiparametric smooth-coefficient partial adjustment model, this study finds evidence for asymmetric peer effects on capital structure adjustment speeds between overlevered and underlevered firms. Overlevered firms' adjustment speeds and peer firm shocks have a U-shaped relationship,...

This study investigates how uncertainty affects firms' target capital structure using a panel data set of U.S. public manufacturers between 2003 and 2018 and finds that high-uncertainty firms have 10.1 (8.1) percentage points lower mean book (market) targets than low-uncertainty firms. This...

This appendix comprises four parts. The first part presents proofs of lemmas and propositions. The second part presents some additional robustness tests. The third part reports the results of analyses designed to reconcile our results with a prior empirical study on a closely related issue. The...

We show that stock liquidity increases the propensity of firms to raise debt capital. The positive effect of liquidity on a debt issuance propensity is much stronger in firms with greater default risk. The effect of liquidity on the cost of debt capital is much larger than its effect on the cost...

We study the effects of uncertainty on corporate leverage adjustments with respect to investment spikes and find that overlevered and underlevered firms behave very differently in response to the combination of uncertainty and investment spikes. Overlevered firms facing high uncertainty converge...

We examine the effect of stock liquidity on the choice between debt and equity financing. Using three quasi-natural experiments, we show that increased stock liquidity increases firms' propensity to finance using debt. In addition, we document that liquidity reduces the cost of debt finance....