On Corporate Capital Structure Adjustments

15 Pages Posted: 9 Jun 2015

See all articles by Viet Anh Dang

Viet Anh Dang

Alliance Manchester Business School

Ian Garrett

Manchester Business School

Date Written: April 17, 2015


Recent research has examined asymmetries in firms’ adjustments toward target leverage. Assuming firms mainly adjust their debt levels, Byoun (Journal of Finance, 2008) finds that firms adjusting most quickly possess two important characteristics: above-target debt and a financing surplus. Using alternative models allowing for adjustments in both debt and total assets, we still find evidence of asymmetries in leverage adjustments, but that firms adjusting fastest have above-target leverage and a financing deficit. Our paper shows how alternative assumptions about leverage dynamics may lead to different conclusions about target adjustment behavior.

Keywords: Capital structure, Dynamic trade-off theory, Partial adjustment model, Asymmetric adjustment, Model

JEL Classification: G32

Suggested Citation

Dang, Viet Anh and Garrett, Ian, On Corporate Capital Structure Adjustments (April 17, 2015). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2616219

Viet Anh Dang (Contact Author)

Alliance Manchester Business School ( email )

AMBS Crawford House
Booth Street West
Manchester, Greater Manchester M15 6PB
United Kingdom
+44(0)16127 50438 (Phone)

Ian Garrett

Manchester Business School ( email )

United Kingdom

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