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We build a model of investment and financing decisions to study the choice between bonds and bank loans in a firm …'s marginal financing decision and its effects on corporate investment. We show that firms with more growth options, higher … investment. We test these predictions using a sample of U.S. firms and present new evidence that supports our theory …
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Empirical evidence suggests that capital structure varies across firms facing different levels of information asymmetry, however, this evidence contradict the prediction of pecking order hypothesis. Although debt capacity constraints offer some explanation for this discrepancy, it fails to...
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