We investigate the dynamics of observed and target leverage ratios and deviations from the targets. The cross-sectional persistence in observed leverage ratios is driven by highly persistent targets, whereas the time series variation is driven by transitory deviations from targets. Deviations...

We investigate the dynamics of observed and target leverage ratios and deviations from the targets. The cross-sectional persistence in leverage ratios is driven by persistent targets, whereas the time series variation is driven by transitory deviations from targets. Consistent with dynamic...

The extent to which conglomerates face frictions in external capital markets has implications for their internal capital allocation. We find that, during recessions, when external financing costs are higher, conglomerates improve the efficiency of internal capital markets by increasing the...

Using firm-level estimates of investment-cash flow sensitivity, I classify firms into groups of high, low, and negative sensitivity. I find that investment-cash flow sensitivity is non-monotonic with respect to financial constraints, cash flows, and growth opportunities. Specifically, firms with...

Investment cash flow sensitivity is associated with both undervestment when cash flows are low and overinvestment when cash flows are high. The accessibility of external capital is positively correlated with cash flows, intensifying investment cash flow sensitivity. Managers actively counteract...

This paper examines the importance of financial constraints for firm investment expenditures by looking at the relationship between investment expenditures and proceeds from voluntary asset sales in financially healthy US manufacturing companies. Specifically, we examine whether asset sales have...

We examine whether market and operating performance affect corporate financing behavior because they are related to target leverage. Our focus on firms that issue both debt and equity enhances our ability to draw inferences. Consistent with dynamic tradeoff theories, dual issuers offset the...