We study the interaction between financing and investment decisions in a dynamic model where the firm has multiple debt issues and equityholders choose the timing of investment. Jointly optimal capital and priority structures can virtually eliminate investment distortions, because debt priority...

In this paper, we examine whether managers time their debt-equity choices to exploit market mispricing. Controlling for the level of external financing and corporate investment activities, we find evidence consistent with the market timing hypothesis. We find managers issue more equity relative...

This paper studies the behavior of leverage ratios in a dynamic trade-off model with real frictions. Firms underutilize debt when financing investment to retain financial flexibility. Underutilization of debt persists even when firms exercise their last investment options, and it is more (less)...

We investigate a firm's optimal investment, financing, and default decisions when it takes an uncertain amount of time and running costs to complete a project. A firm that makes an optimal financing decision delays investment in the presence of time-to-build, whereas a highly levered firm...