The paper provides review of Modigliani-Miller capital structure irrelevance proposition and its development since 1958. The paper suggests some pedagogical insights and introduce risk-shifting interpretations of the MM model. We also discuss shapes of cost of debt and cost of equity functions...

This paper analyzes interdependence of three financial policies, investment decision, financing decision, and dividend policy. Interdependent relationship between the three has been extensively debated within literature of finance. While many studies have been conducted to normal economic...

This study investigates empirically effect of investment decision and dividend policy on financing decision. This research uses two proxies that represent investment decision those are actual investment and investment opportunity. The effects of size effect and profitability are controlled in...

We estimate a dynamic investment model in which firms finance with equity, cash, or debt. Misvaluation affects equity values, and firms optimally issue and repurchase overvalued and undervalued shares. The funds flowing to and from these activities come from investment, dividends, or net cash....

I show that the risk of incurring large employee departure-related costs, unrelated to trade secret-related costs, impacts firms' capital structure decisions. I proxy for these costs with the cross-industry labor mobility of a firm's workers using a novel dynamic textual measure for this...

Share repurchases have become persistent. Firms use cash flow as the primary source of capital to finance repeated share repurchases. This internal financing increases (decreases) retained earnings (paid-in-capital) in the capital structure and weakens the sensitivity of investment to cash flow....

Leverage cross sections more than a few years apart differ markedly, with similarities evaporating as the time between cross sections lengthens. Many firms have high and low leverage at different times, but few keep debt-to-assets ratios consistently above 0.500. Capital-structure stability is...

We quantify the importance of collateral versus taxes for firms' capital structures. We estimate a dynamic contracting model in which a firm seeks financing and is subject to taxation. In the model, collateral constraints arise endogenously. Optimal leverage stays a safe distance from the...

This paper builds a dynamic trade-off model of corporate financing with differences in belief between the insider manager and outside investors. The optimal leverage depends on differences of opinion and can differ significantly from that in standard trade-off models. The manager's market timing...

This paper provides a compact summary of the evidence on capital structure instability and a case-based exploratory investigation of sources of such instability. Substantial instability in capital structure is the norm at publicly held nonfinancial firms. Firm-specific episodes of leverage...