TY  - JOUR
AU  - Kayhan,Ayla
AU  - Titman,Sheridan
TI  - Firms' Histories and Their Capital Structures
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10526
PY  - 2004
Y2  - May 2004
UR  - http://www.nber.org/papers/w10526
L1  - http://www.nber.org/papers/w10526.pdf
N1  - Author contact info:
Ayla Kayhan
Department of Finance
E.J. Ourso School of Business
Louisiana State University
Baton Rouge, LA 70803
Tel: 512/785-4995
E-Mail: akayhan@lsu.edu

Sheridan Titman
Finance Department
McCombs School of Business
University of Texas at Austin
Austin, TX 78712-1179
Tel: 512/232-2787
Fax: 512/471-5073
E-Mail: titman@mail.utexas.edu
AB  - This paper examines how cash flows, investment expenditures and stock price histories affect corporate debt ratios. Consistent with earlier work, we find that these variables have a substantial influence on changes in capital structure. Specifically, stock price changes and financial deficits (i.e., the amount of external capital raised) have strong influences on capital structure changes, but in contrast to previous conclusions, we find that their effects are subsequently at least partially reversed. These results indicate that although a firm's history strongly influence their capital structures, that over time, financing choices tend to move firms towards target debt ratios that are consistent with the tradeoff theories of capital structure.
ER  -