Target Behavior and Financing : How Conclusive is the Evidence ?

@inproceedings{Chang2006TargetBA,
  title={Target Behavior and Financing : How Conclusive is the Evidence ?},
  author={Xin Chang and Sudipto Dasgupta},
  year={2006}
}
The notion that firms have a debt ratio target which is a primary determinant of financing behavior is influential in finance. Yet, how definitive is the evidence? We address this issue by generating samples where financing is unrelated to a firm’s current debt ratio or a target. We find that much of the available evidence in favor of target behavior based on leverage ratio changes can be reproduced for these samples. Taken together, our findings suggest that a number of existing tests of… CONTINUE READING
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