TY  - BOOK
AU  - Hovakimian,Armen
AU  - Kayhan,Ayla
AU  - Titman,Sheridan
ED  - National Bureau of Economic Research.
TI  - Are Corporate Default Probabilities Consistent with the Static Tradeoff Theory?
T2  - NBER working paper series
PY  - 2011///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - August 2011; Hardcopy version available to institutional subscribers
N2  - Default probability plays a central role in the static tradeoff theory of capital structure.  We directly test this theory by regressing the probability of default on proxies for costs and benefits of debt. Contrary to predictions of the theory, firms with higher bankruptcy costs, i.e., smaller firms and firms with lower asset tangibility, choose capital structures with higher bankruptcy risk. Further analysis suggests that the capital structures of smaller firms with lower asset tangibility, which tend to have less access to capital markets, are more sensitive to negative profitability and equity value shocks, making them more susceptible to bankruptcy risk
UR  - https://www.nber.org/papers/w17290
UR  - http://dx.doi.org/10.3386/w17290
ER  -