Tradeoff Theory and Leverage Dynamics of High-Frequency Debt Issuers

42 Pages Posted: 17 Mar 2013 Last revised: 24 Apr 2018

See all articles by B. Espen Eckbo

B. Espen Eckbo

Tuck School of Business at Dartmouth; European Corporate Governance Institute (ECGI)

Michael Kisser

BI Norwegian Business School

Date Written: April 16, 2018

Abstract

We examine whether tradeoff theory explains leverage dynamics of high-frequency net-debt issuers (net of debt rollovers). Our issue-frequency sort screens out low-leverage firms who rarely issue and extremely high-leverage firms who may not issue due to financial distress. The remaining industrial firms raise the bulk of all public and private debts. The persistence of their debt-issuance program over the public lifecycle strongly suggests both low issuance costs and high debt-financing benefits. Nevertheless, we find little evidence to suggest that high-frequency net-debt issuers actively manage leverage towards a capital structure target.

Keywords: Capital structure, external finance, debt issues, equity issues, issue costs, leverage, cash-flow identity

JEL Classification: G32

Suggested Citation

Eckbo, B. Espen and Kisser, Michael, Tradeoff Theory and Leverage Dynamics of High-Frequency Debt Issuers (April 16, 2018). Tuck School of Business Working Paper No. 2234435. Available at SSRN: https://ssrn.com/abstract=2234435 or http://dx.doi.org/10.2139/ssrn.2234435

B. Espen Eckbo (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
603-646-3953 (Phone)
603-646-3805 (Fax)

HOME PAGE: http://www.tuck.dartmouth.edu/eckbo

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Michael Kisser

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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