Target behavior and financing:how conclusive is the evidence?

Chang, Xin and Dasgupta, Sudipto (2009) Target behavior and financing:how conclusive is the evidence? Journal of Finance, 64 (4). pp. 1767-1796. ISSN 0022-1082

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Abstract

The notion that firms have a debt ratio target that 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 target behavior have no power to reject alternatives.

Item Type: Journal Article
Journal or Publication Title: Journal of Finance
Uncontrolled Keywords: /dk/atira/pure/subjectarea/asjc/1400/1402
Subjects:
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 74550
Deposited By: ep_importer_pure
Deposited On: 07 Jul 2015 13:58
Refereed?: Yes
Published?: Published
Last Modified: 15 Oct 2019 03:19
URI: https://eprints.lancs.ac.uk/id/eprint/74550

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