Abstract

http://ssrn.com/abstract=1833425
 
 

References (31)



 
 

Citations (3)



 


 



Testing Dynamic Tradeoff Theory: Evidence from Rebalancing Points.


Andras Danis


Georgia Institute of Technology

Daniel A. Rettl


Vienna Graduate School of Finance (VGSF)

July 15, 2011

International Conference of the French Finance Association (AFFI), May 11-13, 2011

Abstract:     
We develop a simple methodology to identify firms that are at or close to their optimal capital structure. Using this methodology we present cross-sectional and time series evidence in favor of dynamic tradeoff theory. In particular, at rebalancing points the relationship between profitability and leverage is positive, consistent with theoretical predictions. Also, the time series of market leverage, profitability, and equity payouts in the years prior to rebalancing events match the patterns obtained from simulated data. Our methodology is robust to recent critiques of empirical tests of dynamic tradeoff theory.

Number of Pages in PDF File: 38

Keywords: empirical corporate finance, capital structure, dynamic tradeoff theory

JEL Classification: G30, G32

working papers series


Download This Paper

Date posted: May 16, 2011 ; Last revised: December 20, 2012

Suggested Citation

Danis, Andras and Rettl, Daniel A., Testing Dynamic Tradeoff Theory: Evidence from Rebalancing Points. (July 15, 2011). International Conference of the French Finance Association (AFFI), May 11-13, 2011. Available at SSRN: http://ssrn.com/abstract=1833425 or http://dx.doi.org/10.2139/ssrn.1833425

Contact Information

Andras Danis
Georgia Institute of Technology ( email )
Atlanta, GA 30332
United States
HOME PAGE: http://scheller.gatech.edu/danis
Daniel A. Rettl (Contact Author)
Vienna Graduate School of Finance (VGSF) ( email )
Heiligenstädter Straße 46-48
Vienna, 1190
Austria
Feedback to SSRN


Paper statistics
Abstract Views: 658
Downloads: 127
Download Rank: 108,748
References:  31
Citations:  3

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.250 seconds