This article investigates how “systematic” adjustment costs proxied by market imperfections, and macroeconomic conditions affect capital structure dynamics in a cross-country setting. We document substantial variations in firms' capital structure adjustments across countries and,...

Morellec, Nikolov, and Schürhoff (2012) predict that a self-interested manager prefers a leverage level that is lower than the shareholders' desired level, and effective corporate governance encourages timely capital structure rebalancing. In a U.S. sample during 1996-2008, we confirm that both...

Debt-type compensation (i.e., inside debt) exacerbates the divergence in risk preference between the CEO and shareholders that in turn affects the firm's capital structure decisions. An excessively risk-averse CEO uses debt that falls short of the shareholders' desired level, and is eager to...

Empirical evidence overwhelmingly supports a negative relation between the strictness of labor protection laws and a firm’s financial leverage. Given the unique economic and financial environments in China, we examine if the same relationship applies to Chinese firms after the enactment of the...

This paper investigates how capital structure dynamics depend on “systematic” adjustment costs proxied by market imperfections and macroeconomic conditions in a cross-country setting. We document substantial variations in firms' capital structure adjustments across countries as well as over...