joint hypothesis test - whether firms adjust toward target leverage, and whether the proxy used for target leverage is the … true target leverage. Prior studies use the time-series mean leverage for each firm, the industry median leverage, an … estimated cross-sectional leverage, and a tobit estimated leverage using the factors suggested by the static trade-off theory as …

target leverage. We find that firms adjust toward target leverage at a moderate speed, with a half-life of 3.7 years for book … leverage, even after controlling for the traditional determinants of capital structure and firm fixed effects. [ABSTRACT FROM …