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, vol. 64, no. 4, pp. 1767-1796, doi: 10.1111/j.1540-6261.2009.01479.x.

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Title Target behavior and financing: how conclusive is the evidence?
Author(s) Chang, XinORCID iD for Chang, Xin
Dasgupta, Sudipto
Journal name Journal of finance
Volume number 64
Issue number 4
Start page 1767
End page 1796
Total pages 30
Publisher Wiley-Blackwell
Place of publication Hoboken, N.J.
Publication date 2009-08
ISSN 0022-1082
Summary 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.
Language eng
DOI 10.1111/j.1540-6261.2009.01479.x
Field of Research 150205 Investment and Risk Management
1502 Banking, Finance And Investment
Socio Economic Objective 970115 Expanding Knowledge in Commerce
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2009, American Finance Association
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Document type: Journal Article
Collections: Faculty of Business and Law
Department of Finance
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