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Capital Structure Decisions: Which Factors are Reliably Important?Murray Z. FrankUniversity of Minnesota Vidhan K. GoyalHong Kong University of Science & Technology (HKUST) - Department of Finance October 10, 2007 Abstract: This paper examines the relative importance of many factors in the leverage decisions of publicly traded American firms from 1950 to 2003. The most reliable factors are median industry leverage (+ effect on leverage), market-to-book ratio (-), tangibility (+), profits (-), log of assets (+), and expected inflation (+). Industry subsumes a number of smaller effects. The empirical evidence seems reasonably consistent with some versions of the tradeoff theory of capital structure.
Number of Pages in PDF File: 60 Keywords: Capital structure, pecking order, trade-off theory, market timing, multiple imputation JEL Classification: G32 working papers seriesDate posted: July 24, 2004 ; Last revised: December 11, 2007Suggested CitationContact Information
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