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An Empirical Test of Ross's Cash Flow Beta Theory of Capital Structur e

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  • Sugrue, Timothy F
  • Scherr, Fredrick C

Abstract

This paper empirically investigates Stephen A. Ross's (1985) cash flow beta theory of capital structure. Ross hypothesizes that, for firms of similar cash flow variance, there will be an inverse relationship between financial leverage and cash flow beta. This paper provides empirical support for Ross's theory, though the extent of the support depends upon the sample period and the leverage specification. Copyright 1989 by MIT Press.

Suggested Citation

  • Sugrue, Timothy F & Scherr, Fredrick C, 1989. "An Empirical Test of Ross's Cash Flow Beta Theory of Capital Structur e," The Financial Review, Eastern Finance Association, vol. 24(3), pages 355-370, August.
    • Handle: RePEc:bla:finrev:v:24:y:1989:i:3:p:355-70
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    Cited by:

    1. Frederick C. Scherr & Timothy F. Sugrue & Janice B. Ward, 1993. "Financing the Small Firm Start-Up: Determinants of Debt Use," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 3(1), pages 17-36, Fall.

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