The two main theories of capital structure — the tradeoff theory and the pecking order theory — have opposite predictions about the expected relationship between corporate leverage and profitability. According to the tradeoff theory, companies that earn higher profits will use more debt both...

This paper is a cross-sectional analysis of the relationship between common stock price reactions to announcements of convertible security calls and variables that represent possible determinants of changes in common stockholders' wealth. The variables are measures of the following effects of...