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 …

This paper studies the economic and theoretical foundations of insolvency risk measurement and capital adequacy rules … measuring insolvency risk and capital adequacy in Basel III. We show how insolvency risk measurement, capital adequacy and … integrated measure of risk and capital by disentangling assets, debt and equity; the Firm Insolvency Risk Index (FIRI) that is …