Asymmetries in the Firm's use of debt to changing market values

Stephen P. Ferris, Jan Hanousek, Anastasiya Shamshur, Jiri Tresl

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)
19 Downloads (Pure)


Using a sample of U.S. firms over the period, 1984 to 2013, this study examines the relation between market and book leverage ratios. Unlike Welch (2004) who contends that changes in market leverage do not induce adjustments in book leverage, we find an asymmetric effect. That is, firms adjust their book leverage only when the changes in market leverage are due to increases in equity values. No adjustment is observed when firm equity values decrease. Our results are consistent with Myers (1977) and Barclay et al. (2006) who argue that optimal debt levels decrease with corporate growth opportunities.
Original languageEnglish
Pages (from-to)542–555
JournalJournal of Corporate Finance
Early online date12 Dec 2017
Publication statusPublished - Feb 2018


  • Market leverage
  • Book leverage
  • Capital structure
  • Adjustment speed

Cite this