Hess, Dieter; Immenkötter, Philipp - Centre for Financial Research <Köln> - 2011
We study the eect of the business cycle on optimal capital structure choice and thebenet to leverage. We propose a regime switching model with a state-dependentcash ow process to capture macroeconomic risk in a rm's cash ow. Our modelis parsimonious but still realistic and allows for a wide...