This paper studies capital structure adjustment mechanisms of firms that experience substantial changes in leverage. Adjustments appear to be asymmetric among firms with large increases and those with large decreases in debt ratios. The different adjustments are not due to differences in...

Zervos documents the precise costs of debt and equity issuance, both domestically and internationally, for firms in Brazil, Chile, and Mexico. Costs include investment banking and legal fees, regulatory and exchange listing costs, rating agency fees, and expenditures for marketing and...

We examine the optimal size and composition of banks’ total loss absorbing capacity (TLAC). Optimal size is driven by the trade-off between providing liquidity services through deposits and minimizing deadweight default costs. Optimal composition (equity vs. bail-in debt) is driven by the...

We examine the optimal size and composition of banks' total loss absorbing capacity (TLAC). Optimal size is driven by the trade-off between providing liquidity services through deposits and minimizing deadweight default costs. Optimal composition (equity vs. bail-in debt) is driven by the...

Models based on asymmetric information predict that debt is least sensitive to private information and cannot explain the illiquidity of corporate debt in secondary markets. We analyze security design with moral hazard and offer a new explanation. First, the optimal compensation contract creates...

To what extent can private firms' external equity substitute for debt financing in a banking crisis? To answer this question, I use firm-level data and firm-bank linkages to estimate the causal effect of an imported lending cut from a large German bank on firms' capital structure and real...