We examine leverage changes around mergers by similar-size firms. If asset characteristics drive leverage, both acquirer and target pre-merger leverage should predict long-term post-merger leverage. We find that only acquirer pre-merger leverage has a long-term effect. The effect of target...

Traditional target structure theories predict that all financing decisions move firms towards target capital structures. On the other hand, transitory debt hypothesis predicts that firms deliberately but temporarily deviate from target capital structures to fund a particular corporate action and...

High leverage can be used to improve a firm's bargaining position with unions. I show that in the U.S. such use of leverage is concentrated in states without right-to-work (RTW) laws. The use of high leverage by unionized firms in these states is associated with high market-to-book ratios and is...