Capital Structure and Stock Returns

Ivo Welch

Yale School of Management Working Papers from Yale School of Management

Abstract: U.S. corporations do not use their debt and equity issuing and repurchasing activities to counteract the mechanistic effects of stock returns on their debt equity ratios. Thus, over 1-5 year horizons, stock returns can explain about 40% of debt ratio dynamics. Although corporate (net) issuing activity is lively, and although it can explain the remaining 60% of debt ratio dynamics (long-term debt issuing activity being most capital structure relevant), corporate issuing mo

Date: 2002-01-01, Revised 2003-08-01
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Journal Article: Capital Structure and Stock Returns (2004)
Working Paper: Capital Structure and Stock Returns (2003)
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