Credit lines and leverage adjustments

G. Brandon Lockhart

Journal of Corporate Finance, 2014, vol. 25, issue C, 274-288

Abstract: Adjustment costs play a prominent role in explanations of capital structure, but the extent of their economic importance is unknown. A credit line has institutional features important for this analysis, notably its sunk costs of access to the debt market, its revolving nature, and its covenant-sourced contingent nature. I find that the credit line is associated with cross-sectional variation in estimated speeds of adjustment to target leverage in patterns consistent with the importance of adjustment costs, and with the importance of maintaining financial flexibility for liquidity and investment needs.

Keywords: Capital structure; Credit lines; Financial flexibility; Partial adjustment (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119913001466
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:25:y:2014:i:c:p:274-288

DOI: 10.1016/j.jcorpfin.2013.12.011

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().