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Asymmetries in the firm's use of debt to changing market values

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    0490260 - NHU-C 2019 RIV NL eng J - Journal Article
    Ferris, S. P. - Hanousek, Jan - Shamshur, A. - Trešl, J.
    Asymmetries in the firm's use of debt to changing market values.
    Journal of Corporate Finance. Roč. 48, February (2018), s. 542-555. ISSN 0929-1199
    R&D Projects: GA ČR(CZ) GA15-15927S
    Institutional support: Progres-Q24
    Keywords : market leverage * book leverage * capital structure
    Subject RIV: AH - Economics
    OBOR OECD: Finance
    Impact factor: 2.349, year: 2018

    Using a sample of U.S. firms over the period, 1984 to 2013, this study examines the relation between market and book leverage ratios. Unlike Welch (2004) who contends that changes in market leverage do not induce adjustments in book leverage, we find an asymmetric effect. That is, firms adjust their book leverage only when the changes in market leverage are due to increases in equity values. No adjustment is observed when firm equity values decrease. Our results are consistent with Myers (1977) and Barclay et al. (2006) who argue that optimal debt levels decrease with corporate growth opportunities.
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