Default probability plays a central role in the static tradeoff theory of capital structure. We directly test this … theory by regressing the probability of default on proxies for costs and benefits of debt. Contrary to predictions of the … theory, firms with higher bankruptcy costs, i.e., smaller firms and firms with lower asset tangibility, choose capital …

Probability of default plays a central role in the static tradeoff theory of capital structure. We provide a direct … test of this theory by regressing the probability of default, measured by S&P credit ratings and Moody's KMV Expected …. Contrary to predictions of the theory, firms with high bankruptcy costs, that is smaller firms and firms with lower asset …

set comprising the population of over eight million company year observations and 153,000 instances of insolvency covering … formal insolvency proceedings than other firms and how this varies over the economic cycle. Controlling for size, age, sector … and macro-economic conditions (base hazard) we find that private-equity backed buyouts are no more prone to insolvency …