This paper finds strong support for the argument that heterogeneous adjustment costs significantly affects the speed with which a firm approaches its target capital structure. We find that firms with higher non-debt tax shields (from R&D), and cash holdings adjust faster to their target capital...

This paper studies how accounting treatment of off-balance sheet financing affects the speed of capital structure adjustment. Utilizing a quasi-natural experiment created by Accounting Standards Update (ASU) No. 2016-02 which requires operating lease to be capitalized on the balance sheet, we...