Do Firms Rebalance Their Capital Structures?

Do Firms Rebalance Their Capital Structures?

We empirically examine whether firms engage in a dynamic rebalancing of their capital structures while allowing for costly adjustment. We begin by showing that the presence of adjustment costs has significant implications for corporate financial policy and the interpretation of previous empirical results. After confirming that financing behavior is consistent with the presence of adjustment cos...

Do Firms Rebalance their Capital Structure?

We empirically examine the trade-off theory of capital structure, allowing for infrequent adjustment. After showing that the behavior of financing decisions (security issuances and retirements) is consistent with direct evidence on external financing costs, we use a dynamic duration model to show that firms behave as though adhering to a dynamic trade-off policy in which they actively rebalance...

Do German Firms Earn their Cost of Capital Considering Tax Effects caused by Debt and Provisions?

In this paper the performance of a sample of German companies is measured by comparing the initially invested capital adjusted for cost of capital, dividends paid, share repurchases and equity raised with the market value at the end of the holding period. All possible holding periods between 1987 and 2000 are covered. The sample is subdivided into companies listed in the DAX-, MDAXand SMAX-inde...

Do Firms Undertake Self-Tender Offers to Optimize Capital Structure?*

Companies occasionally announce that they undertake self-tender offers to optimize their capital structure. For example, in January 1997, James M. Usdan, president and chief executive officer of RehabCare Group, stated that “the use of cash and borrowing to fund the tender offer will result in a more efficient capital structure for the company” (Business Wire, January 31, 1997). Further, the an...

DISCUSSION OF “THE INFLUENCE OF FIRM MATURATION ON FIRMS’ RATE OF ADJUSTMENT TO THEIR OPTIMAL CAPITAL STRUCTURES” by