Corporate Capital Structure Actions

77 Pages Posted: 9 Dec 2016 Last revised: 21 Jul 2019

See all articles by Murray Z. Frank

Murray Z. Frank

University of Minnesota

Tao Shen

Tsinghua University

Date Written: June 26, 2019


This paper is a study of the financing actions by firms to adjust leverage: debt reductions, stock sales, debt issues, and stock purchases. Each type of action is positively autocorrelated. The standard empirical models of corporate leverage produce leverage targets that do not correctly predict actual debt issues and stock sales. Firm-specific time-series regressions with the logarithm of firm assets and market-to-book as regressors, correctly predict these patterns. The estimates imply that on average firms adjust toward their target much faster than generally understood, closing about half of the leverage gap in a year.

Keywords: Corporate leverage target, Stock sales, Stock purchases, Debt issues, Debt reductions

JEL Classification: C38, G32

Suggested Citation

Frank, Murray Z. and Shen, Tao, Corporate Capital Structure Actions (June 26, 2019). Available at SSRN: or

Murray Z. Frank

University of Minnesota ( email )

Carlson School of Management
321 19th Avenue South
Minneapolis, MN 55455
United States
612-625-5678 (Phone)

Tao Shen (Contact Author)

Tsinghua University ( email )

Department of Finance
School of Economics and Management

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics