A misunderstanding of textbook-level finance principles underlies the political attack on share buybacks. Critics advocate increasing the tax on buybacks in the hope of inducing firms to invest more and in ways that benefit workers. This strategy will backfire at growth-stage firms, which will...

This paper provides a compact summary of the evidence on capital structure instability and a case-based exploratory investigation of sources of such instability. Substantial instability in capital structure is the norm at publicly held nonfinancial firms. Firm-specific episodes of leverage...

Liquidity production is a central role of banks. When there is a market premium for the production of (socially valuable) liquid financial claims and no other departures from the Modigliani and Miller (1958, MM) assumptions, we show that high leverage is optimal for banks. In this model, high...

type="main" <title type="main">ABSTRACT</title> <p>Leverage cross-sections more than a few years apart differ markedly, with similarities evaporating as the time between them lengthens. Many firms have high and low leverage at different times, but few keep debt-to-assets ratios consistently above 0.500. Capital structure...</p>