In this communication we have proposed a simple model for the dynamics of the target leverage ratio of a rm and performed a theoretical investigation of its time path. The gap between a rm’s current target leverage ratio and the long-term target ratio is found to diminish exponentially, and the decay rate is determined by the volatility of the leverage ratio and the long-term target ratio only....

T he cyclical banks have different behavior than other banks. The structure of the balance sheet in cyclical banks is different from anti-cyclical banks. The cyclical banks have a relationship between leverage growth and asset growth while the other banks have no relationship between asset growth and leverage growth in the banking system. This relationship depends on the structure of...

Unlike fixed-pitch instruments such as the piano, human singing can stray from a target pitch by as much as a semitone while still being perceived as a single fixed note. This paper presents a study of the difference between target pitch and actualized pitch in natural singing. A set of 50 subjects singing the same melody and lyric is used to compare utterance styles. An algorithm for alignment...

We empirically examine the influence of risk on firms’ capital structure adjustments. The process of adjustment is asymmetric and depends on the type of risk, its magnitude, the firm’s actual leverage with respect to its target, and its financial status. We show that firms with financial surpluses and above-target leverage adjust their leverage more rapidly when firm-specific risk is low and wh...

This paper develops a real options model of capital structure to understand two distinct roles played by intellectual capital in corporate financing decisions. First, intellectual capital limits a firm’s debt capacity because of its low liquidation value. Second, intellectual capital enhances a firm’s debt capacity through its positive impact on the earnings dynamics. We show that the former is...

4 This paper explores dynamic mean-variance asset allocation over long horizons. This is 5 equivalent to target-based investing with a quadratic loss penalty for deviations from the target 6 level of terminal wealth. We provide a number of illustrative examples in a setting with a 7 risky stock index and a risk-free asset. Our underlying model is very simple: the value of the 8 risky index is a...

The banks’ response to their changes in leverage ratios is examined and evaluated in this paper. This reaction can be interpreted as if the coefficient of total debts to equity (lev1) and total assets to equity (lev2) are positive as anticipated in the banking network of Iran. The paper uses data from 31 Iranian banks’ annual databases during the course of 2006-13 in order to estimate an empiri...