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dc.contributor.authorEckbo, B. Espen
dc.contributor.authorKisser, Michael
dc.date.accessioned2022-02-01T11:45:03Z
dc.date.available2022-02-01T11:45:03Z
dc.date.created2020-11-06T12:50:32Z
dc.date.issued2020
dc.identifier.citationReview of Finance, 2020, Volume 25, Issue 4, July 2021, Pages 1089–1128en_US
dc.identifier.issn1572-3097
dc.identifier.urihttps://hdl.handle.net/11250/2976239
dc.description.abstractWith zero capital structure rebalancing costs, dynamic trade-off theory predicts that firms stay at their leverage targets with more profitable firms staying at higher leverage. This prediction is rejected by the robustly negative correlation between leverage and profitability. When rebalancing costs are added to this theory, it predicts a positive leverage–profitability correlation only in periods where companies pay these costs and actively rebalance their capital structures. However, we show that the correlation is negative when firms issue debt and distribute the proceeds to shareholders—precisely the case where the theory predicts it should be positive. Our results thus resurrect the leverage–profitability puzzle.en_US
dc.language.isoengen_US
dc.publisherOxford Uni. Pressen_US
dc.subjectG32 - Financing Policyen_US
dc.subjectFinancial Risk and Risk Managementen_US
dc.subjectCapital and Ownership Structureen_US
dc.subjectValue of Firmsen_US
dc.subjectGoodwillen_US
dc.titleThe leverage-profitability puzzle resurrecteden_US
dc.typeJournal articleen_US
dc.typePeer revieweden_US
dc.description.versionacceptedVersionen_US
dc.rights.holderOxford University Pressen_US
dc.source.pagenumber1089–1128en_US
dc.source.volume25en_US
dc.source.journalReview of Financeen_US
dc.source.issue4en_US
dc.identifier.doi10.1093/rof/rfaa032
dc.identifier.cristin1845608
cristin.ispublishedtrue
cristin.fulltextpreprint
cristin.qualitycode2


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