Slow to Adjust: International Diversification and the Speed of Adjustment to Cash and Leverage Targets

Determinants of Capital Structure Revisited

We examine the determinants of capital structure for S&P 500 firms over the recent 25 years from 2000 to 2024. Using both traditional regression models and machine-learning approaches, we investigate how firm fundamentals and macroeconomic conditions jointly shape firms’ leverage decisions. Across several empirical methods, including OLS, Lasso, Ridge, Random Forest, and Gradient Boosting, we find that operating profitability, tax-shield benefits, and earnings volatility consistently emerge as the most important determinants of leverage. Firms with higher profitability rely less on external financing, while tax incentives or greater internal cash flow uncertainty can result in the use of more debt. Nonlinear models further highlight liquidity as an important predictor, suggesting that internal cashflow buffers reduce reliance on external financing. At the macro level, GDP growth is negatively associated with leverage, consistent with firms deleveraging during economic expansions. Overall, our findings suggest that firm-specific characteristics play a dominant role in shaping capital structure decisions, while macroeconomic conditions exert a secondary but meaningful influence.

When does macroeconomic volatility reshape capital structure? Institutional buffering and dynamic leverage adjustment in Vietnamese listed firms

Extreme Capital Structure and Firm Performance in Emerging Economies: The Moderating Role of Liquidity

This study examines the moderating role of liquidity in the relationship between extreme capital structure and firm performance among listed firms in emerging markets. It is motivated by the need to better understand how financing constraints and liquidity management influence firm performance in environments characterised by high financial frictions and limited access to external capital. Extreme capital structure is defined as firms maintaining very low levels of debt, measured using thresholds of 1% (ultra-low debt) and 5% for both long-term debt and total debt. The analysis is based on a panel dataset of non-financial listed firms over the period 2006–2024 and employs a dynamic panel System Generalised Method of Moments (System GMM) complemented by a Random Effects model for robustness. Empirical results indicate that liquidity has a meaningful and predominantly positive moderating effect. This is observed when firms maintain extremely low long-term debt (1% threshold) and low long-term debt (5% threshold). Liquidity enhances firm performance. This effect is strongest for return on assets (ROA) and return on equity (ROE). The effect on Tobin’s Q is weaker but remains generally positive. These findings highlight the strategic importance of liquidity in improving profitability and financial resilience under conservative financing structures. However, the findings are limited to listed non-financial firms in emerging markets and may not be generalizable to SMEs or unlisted firms. Future research could explore the threshold at which liquidity ceases to generate benefits or begins to produce diminishing returns in ultra-low leverage contexts.

Brand Capital and Leverage Adjustments

Using a sample of U.S. firm‐year observations, we document a positive association between brand capital and the speed of leverage adjustment. This relationship is stronger among firms that exhibit greater opacity in their information disclosure, weaker governance, and more rigid financial constraints. The results are consistent with the view that brand capital is associated with lower adjustment frictions through information signalling and reputational monitoring. The relationship is also more pronounced among overleveraged firms. Finally, we find some evidence that leverage adjustments are associated with greater future firm value among firms with higher brand capital.

Fintech credit and corporate cash holdings around the world

This study examines the relationship between fintech credit and corporate cash holdings in a global context. Using a sample of 17,930 firms across 30 countries, we find a significant negative relationship between fintech credit and cash holdings. We further provide evidence that fintech credit negatively influences firm cash holdings through lower financial frictions and better corporate governance channels. Additional analysis reveals that the negative influence of fintech credit on cash holdings is more pronounced among firms in countries with higher economic development, higher financial development, stronger investor protection, and higher national governance quality. Further evidence shows that this negative effect is stronger among financially constrained firms and those operating in highly competitive industries. Our results are consistent across several robustness tests and are free from endogeneity issues. JEL Classification: E51, E66, G23, G32, G38

Leverage Adjustments, Executive Incentives, and the Market Valuation of Acquisitions Under State Capitalism: Evidence From China

We examine how state ownership and CEO financial incentives jointly condition the market valuation of acquisition‐related leverage adjustments in 2251 completed M&A deals by Chinese A‐share listed acquirers (2013–2023). Acquirers draw on spare financing capacity at deal completion, with larger leverage increases among underleveraged firms. In the pooled sample, leverage changes are not systematically associated with announcement returns. Within state‐owned enterprises (SOEs), however, this association is more negative at higher CEO financial incentive levels—a pattern concentrated in cash compensation and consistent with incentive‐contingent discounting under soft budget constraints—and is sharpest in the symmetric window around the 2015 SOE pay‐cap reform.