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Capital Structure and Stock Returns

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  • Ivo Welch

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

Suggested Citation

  • Ivo Welch, 2002. "Capital Structure and Stock Returns," Yale School of Management Working Papers ysm263, Yale School of Management, revised 01 Aug 2003.
  • Handle: RePEc:ysm:somwrk:ysm263
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    File URL: http://icfpub.som.yale.edu/publications/2478
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