Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
We have created a novel index that classifies U.S. public firms by their leverage choice. Our statistical approach to the construction of this index considers the interaction of all firm characteristics and unpredictable events that shapes the observed leverage choices. We have subsequently associated our estimates of the degree and persistence of short-term and long-term debt fluctuations with pecking-order, market-timing, and static and dynamic trade-off theories. Our index reveals that: (i) one-third of firms have a stationary leverage target, (ii) adjustments to targets are faster for short-term debt, and (iii) the persistence of long-term debt ratios is driven by investment constraints and market conditions.