| Summary: | 博士 === 國立高雄科技大學 === 財務金融學院博士班 === 107 === Using Taiwan’s equity data, we show that while market leverage ratio is negatively related to lagged stock returns and profitability for the full sample and passive firms that do not issue or repurchase any security, debt-reduction firms and debt issuers, these two effects are nonexistent for dual issuers that issue both equity and debt and equity issuers. Furthermore, dual issuers adjust their leverages toward target the fastest, whereas passive firms do the slowest. On average, the speeds of adjustment toward book (market) leverage targets for dual issuers and passive firms are 59% (68%) and 6% (16%) per year, respectively. Moreover, the more reliable factors determining leverage ratio are lagged stock returns, profitability, firm size, tangibility, and mean industry leverage. Overall, our out-of-U.S.-sample evidence seems to support the view that the lagged stock returns and profitability effects on leverage are consistent with the dynamic trade-off hypothesis of capital structure that accounts for costly adjustment.
Keywords: Trade-off theory; Capital structure; Target leverage; Adjustment speed; Taiwan stock market
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