In this paper, we develop and test empirically a model of capital structure. We show analytically that the square of 1 minus the debt ratio (total debt divided by total assets) is positively associated with the inverse of total assets and negatively associated with the log of total assets...

Traditional finance theories assume that investors are risk averse whereas in reality investors exhibit both risk averse and risk seeking behaviors. For example the same individual could be purchasing insurance (risk averse) and lottery ticket (risk seeking) simultaneously. We propose that the...