The objective of this study is to empirically examine the capital structure theories that can explain the capital structure choice made by the firms that are operating in China, India, and South Africa. The study tests the capital structure theories as a stand-alone basis as well as an...

Understanding the dynamics of the leverage ratio is at the heart of the empirical research about firms' capital structure, as they can be very different under alternative theoretical models. The pillars of almost all empirical applications are the maintained assumptions of poolability and...

This paper proposes a probit model to test capital structure theories. It focuses on leverage increasing capital raisings and tests the various competing theories. It is shown that this approach does not have the spurious ratio problem documented by Barraclough (2007) that plague traditional...

We employ an error correction model of leverage to test the trade-off and pecking order theories of capital structure for firms in the UK, France and Germany. The error correction framework extends the partial adjustment model by explicitly modelling changes in target leverage and past...

This work documents the existence of a cointegration relationship between credit spreads, leverage and equity volatility for a large set of US companies. It is shown that accounting for the long-run equilibrium dynamic between these variables is essential to correctly explain credit spread...