The DOI matches its Crossref record; 47 of the 47 references it cites were found in a registry or an index; 6 of the 25 sources its claims cite were checked for support.
The Capital Structure Puzzle
Open accessAbstract
The finance and economics literature has at least three "managerial" strands: (1) descriptions of managerial capitalism, in which the separation of ownership and control is taken as a central fact of life, for example Berle and Means [5]; (2) agency theory, pioneered for finance by Jensen and Meckling [18], and (3) the detailed analysis of the personal risks and rewards facing managers and how their responses affect firms' financing or investment choices.For examples of Strand (3), see Ross's articles on financial signalling [36, 37]. 2 Put forward in "Debt and Taxes," [27], esp.pp.272-273.Note that Miller did not claim that all of firms' financing habits are neutral mutations, only that some of them may be.I doubt that Miller intended this idea as a strict null hypothesis (see below).
Overview
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Claims the paper makes
75 Own interpretation · 13 Sources not found · 3 Supported · 3 Partly supported · 3 No basis given · 2 No full text of the sources · 1 Not checked yet · accuracy not yet measured
The cited sources support only part of this claim — read each source’s verdict below.
In the paper
“Firms holding valuable intangible assets or growth opportunities tend to borrow less than firms holding mostly tangible assets.”
What the sources say
- Supportedcites Long and Malitz [21] 21. Long, M. S., and E. B. Malitz, "Investment Patterns and Financial Leverage," Working Paper, National Bureau of Economic Research, 1983. source
The Theory section says firms with tangible investment opportunities can support more debt than firms with intangible or firm-specific opportunities. The Conclusions and Implications section also reports that firms investing heavily in intangibles have lower debt capacity than those investing in tangible assets. (LLM, conf=0.94)
- Not matchedcites Williamson [41] 41. Williamson, S., "The Moral Hazard Theory of Corporate Financial Structure: An Empirical Test," Unpublished Ph.D. Dissertation, MIT, 1981.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plaincorrelational- Asserted: passes — The authors put it forward as true.
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- Supported
The cited sources support only part of this claim — read each source’s verdict below.
In the paper
“In Miller's theory, the personal income taxes on interest payments would exactly offset the corporate interest tax shield, provided that the firm pays the full statutory tax rate.”
What the sources say
- Partly supportedcites [27] 27. Miller, M., "Debt and Taxes," Journal of Finance, 32 (May 1977), 261-275. sourceExperimental — accuracy not yet measured
In “Market Equilibrium and the Behavior of Firms and Individuals” (page unavailable), Miller says personal taxes on bond interest can offset the corporate benefit of deductible interest, and that the offset is one-for-one when the relevant tax rates satisfy a specified relationship. Paying the full statutory corporate tax rate alone does not establish that relationship; the personal tax rates on bond and stock income also matter. (LLM, conf=0.87)
hedged- Asserted: passes — The authors put it forward as true.
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- Partly supported
Every source the paper cites for this claim was checked and supports it.
In the paper
“However, since the equilibrium only determines aggregates, debt policy should not matter for any single taxpaying firm.”
What the sources say
- Supportedcites [27] 27. Miller, M., "Debt and Taxes," Journal of Finance, 32 (May 1977), 261-275. source
Section IV, “Taxes and Market Equilibrium” (page not supplied), says the equilibrium sets aggregate corporate debt but no optimum debt ratio for an individual firm. It also says that, in equilibrium, a firm's value is independent of its capital structure despite the tax deductibility of interest. (LLM, conf=0.94)
plain- Asserted: passes — The authors put it forward as true.
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- Supported
The cited sources support only part of this claim — read each source’s verdict below.
In the paper
“Risky firms tend to borrow less, other things equal.For example, both Long and Malitz [21] and Williamson [41] found significant negative relationships between unlevered betas and the level of borrowing.”
What the sources say
- Partly supportedcites Long and Malitz [21] 21. Long, M. S., and E. B. Malitz, "Investment Patterns and Financial Leverage," Working Paper, National Bureau of Economic Research, 1983. sourceExperimental — accuracy not yet measured
Table 6 reports a negative coefficient for unlevered beta (−0.099, t-statistic 7.62), and the Empirical Results section says its effect on leverage is negative. But that section also reports a significant positive relationship between total risk and leverage, so the broader claim that risky firms generally borrow less is not supported without specifying the risk measure. (LLM, conf=0.89)
- Not matchedcites Williamson [41] 41. Williamson, S., "The Moral Hazard Theory of Corporate Financial Structure: An Empirical Test," Unpublished Ph.D. Dissertation, MIT, 1981.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plaincorrelational- Asserted: passes — The authors put it forward as true.
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- Partly supported
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Then if adjustment costs are small, and firms stay near their target debt ratios, I find it hard to understand the observed diversity of capital structures across firms that seem similar in a static tradeoff framework.”
plain- Asserted: passes — The authors put it forward as true.
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The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“The extensive trading of depreciation tax shields and investment tax credits, through financial leases and other devices, proves that plenty of firms face low marginal rates.”
boosteddirect- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Thus Miller's model allows us to explain the dispersion of actual debt policies without having to introduce non-value-maximizing managers.”
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“Firms can not immediately offset the random events that bump them away from the optimum, so there should be some cross-sectional dispersion of actual debt ratios across a sample of firms having the same target ratio.”
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“and that is an assumption we can immediately reject.”
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“Trouble is, this explanation works only if we assume that all firms face approximately the same marginal tax rate”
plainconditional- Asserted: passes — The authors put it forward as true.
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In the paper
“I will argue that this theory performs at least as well as the static tradeoff theory in explaining what we know about actual financing choices and their average impacts on stock prices.”
plain- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The firm may choose to reduce these costs by issuing stock now even if new equity is not needed immediately to finance real investment, just to move the firm down the pecking order.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“It won't go out of its way to issue debt and retire equity to achieve a more normal debt ratio.”
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“However, recent work based on asymmetric information gives predictions roughly in line with the pecking order theory.”
What the sources say
- Not matchedcites [34] 34. Myers, S., and N. Majluf, "Corporate Financing and Investment Decisions When Firms Have Information Investors Do Not Have," Journal of Financial Economics, forthcoming.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plaincorrelational- Asserted: passes — The authors put it forward as true.
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In the paper
“The bulk of required external financing came from borrowing.”
What the sources say
- Not matchedcites [7] 7. Brealey, R. A. and S. C. Myers, Principles of Corporate Finance, 2nd Ed., McGraw-Hill Book Co., New York, 1984.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plain- Asserted: passes — The authors put it forward as true.
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- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“it seems reasonable to predict that the average stock price impact of high-grade debt issues will be small relative to the average impact of stock issues.”
hedgedcorrelational- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“If this story is right, average debt ratios will vary from industry to industry, because asset risk, asset type, and requirements for external funds also vary by industry.”
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“His proxy for a firm's intangibles and growth opportunities was the difference between the market value of its debt and equity securities and the replacement cost of its tangible assets.The higher this proxy, he found, the less the firm's debt-to-value ratio.”
What the sources say
- Not matchedcites Williamson [41] 41. Williamson, S., "The Moral Hazard Theory of Corporate Financial Structure: An Empirical Test," Unpublished Ph.D. Dissertation, MIT, 1981.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plaincorrelational- Asserted: passes — The authors put it forward as true.
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- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“In other words, financial slack (liquid assets or reserve borrowing power) is valuable, and the firm may rationally issue stock to acquire it.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“In other words, financial slack (liquid assets or reserve borrowing power) is valuable, and the firm may rationally issue stock to acquire it.”
plain- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Firms holding tangible assets-in-place having active second-hand markets will borrow less than firms holding specialized, intangible assets or valuable growth opportunities.”
plaincorrelational- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The simple asymmetric information model I used to motivate the pecking order hypothesis does predict that the announcement of a stock issue will cause stock price to fall.”
plaindirect- Asserted: passes — The authors put it forward as true.
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- The authors state this as an assumption: Managers have special information that investors do not have.
In the paper
“Net new stock issues were never more than 6 percent of external financing.”
What the sources say
- Not matchedcites [7] 7. Brealey, R. A. and S. C. Myers, Principles of Corporate Finance, 2nd Ed., McGraw-Hill Book Co., New York, 1984.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plain- Asserted: passes — The authors put it forward as true.
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- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Specialized, intangible assets or growth opportunities are more likely to lose value in financial distress.”
hedgedcorrelational- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“It also predicts that stock price should not fall, other things equal, if default-risk debt is issued.”
plain- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Since costs of financial distress are caused by threatened or actual default, safe firms ought to be able to borrow more before expected costs of financial distress offset the tax advantages of borrowing.”
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“But a long-run industry average will not be a meaningful target for individual firms in that industry.”
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“Actual debt ratios vary widely across apparently similar firms.”
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“Sticky dividend policies, plus unpredictable fluctuations in profitability and investment opportunities, mean that internally-generated cash flow may be more or less than investment outlays.”
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In the paper
“Since target dividend payout ratios are sticky, and investment opportunities fluctuate relative to internal cash flow, the firm will from time to time exhaust its ability to issue safe debt.”
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“Given that external finance was needed, managers rarely thought of issuing stock:”
What the sources say
- Not matchedcites [13] 13. Donaldson, G., Corporate Debt Capacity: A Study of Corporate Debt Policy and the Determination of Corporate Debt Capacity, Boston, Division of Research, Harvard Graduate School of Business Administration, 1961.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plain- Asserted: passes — The authors put it forward as true.
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- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The evidence on exchanges hardly builds confidence in the static tradeoff theory as a description of financing behavior.”
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“But if management acts this way, its decision to issue will signal bad news to both old and new shareholders.”
plaindirect- Asserted: passes — The authors put it forward as true.
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- The authors state this as an assumption: The firm's manager knows x and y, while investors in capital markets do not and see only a joint distribution of possible values (x, y).
- The authors state this as an assumption: Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.
- The authors state this as an assumption: MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.
- The authors state this as an assumption: The information asymmetry is taken as given.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Then the manager will issue and invest when y 2 AN.”
plaindirect- Asserted: passes — The authors put it forward as true.
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- The authors state this as an assumption: The firm's manager knows x and y, while investors in capital markets do not and see only a joint distribution of possible values (x, y).
- The authors state this as an assumption: Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.
- The authors state this as an assumption: MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.
- The authors state this as an assumption: The information asymmetry is taken as given.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“There is plenty of indirect evidence indicating that the level of borrowing is determined not just by the value and risk of the firm's assets, but also by the type of assets it holds.”
hedgeddirect- Asserted: passes — The authors put it forward as true.
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In the paper
“If the manager with superior information acts to maximize the intrinsic value of existing shares, then the announcement of a stock issue should be bad news, other things equal, because stock issues will be more likely when the manager receives bad news.”
plaindirect- Asserted: passes — The authors put it forward as true.
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- The authors state this as an assumption: Managers have special information that investors do not have.
The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“We know these costs exist, although we may debate their magnitude.”
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In the paper
“This is what Dann and Mikkleson [10] find.”
What the sources say
- Not checked — no full text of the sourcecites Dann and Mikkleson [10] 10. Dann, L. Y. and W. H. Mikkleson, "Convertible Debt Issuance, Capital Structure Change and Financing-Related Information: Some New Evidence," Working Paper, Amos Tuck School of Business Administration, 1983. source
plaincorrelational- Asserted: passes — The authors put it forward as true.
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In the paper
“Firms prefer internal finance.”
What the sources say
- Not matchedcites [13] 13. Donaldson, G., Corporate Debt Capacity: A Study of Corporate Debt Policy and the Determination of Corporate Debt Capacity, Boston, Division of Research, Harvard Graduate School of Business Administration, 1961.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“If the inside information is favorable, however, the firm may pass up a positive-NPV investment opportunity rather than issue undervalued shares.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
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- The authors state this as an assumption: The firm's manager knows x and y, while investors in capital markets do not and see only a joint distribution of possible values (x, y).
- The authors state this as an assumption: Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.
- The authors state this as an assumption: MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.
- The authors state this as an assumption: The information asymmetry is taken as given.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Risky firms ought to borrow less, other things equal.”
plaindirect- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Each firm's observed debt ratio reflects its cumulative requirements for external finance.”
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“If it is less, the firm first draws down its cash balance or marketable securities portfolio.”
What the sources say
- Not matchedcites [13] 13. Donaldson, G., Corporate Debt Capacity: A Study of Corporate Debt Policy and the Determination of Corporate Debt Capacity, Boston, Division of Research, Harvard Graduate School of Business Administration, 1961.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plaindirect- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“When this happens, the firm turns to less risky securities first-for example, risky debt or convertibles before common stock.”
plaindirect- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The crucial difference between this and the static tradeoff story is that, in the modified pecking order story, observed debt ratios will reflect the cumulative requirement for external financing-a requirement cumulated over an extended period.”
plaindirect- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“In this story, there is no well-defined target debt-equity mix, because there are two kinds of equity, internal and external, one at the top of the pecking order and one at the bottom.”
plain- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“They set target dividend payout ratios so that normal rates of equity investment can be met by internally generated funds.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: unclear — It is unclear why the paper says it holds.
None of the sources cited for this claim have been checked yet.
In the paper
“Marsh [22] and Taggart [39] have found some evidence that firms adjust towards a target debt-to-value ratio.”
What the sources say
- Not matchedcites Marsh [22] 22. Marsh, P. R., "The Choice Between Equity and Debt: An Empirical Study," Journal of Finance, 37 (March 1982), 121-144.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
- Not checked — no full text of the sourcecites Taggart [39] 39. Taggart, R., "A Model of Corporate Financing Decisions," Journal of Finance, 32 (December 1977), 1467-1484. source
hedgedconditional- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: unclear — It is unclear whether the paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The firm may also plan to cover part of normal investment outlays with new borrowing, but it tries to restrain itself enough to keep the debt safe-that is, reasonably close to default-risk free.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“An unprofitable firm in the same industry will end up with a relatively high debt ratio.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: unclear — It is unclear why the paper says it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Firms have good reasons to avoid having to finance real investment by issuing common stock or other risky securities.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: unclear — It is unclear whether it could be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
In the paper
“For all non-financial corporations over the decade 1973-1982, internally generated cash covered, on average, 62 percent of capital expenditures, including investment in inventory and other current assets.”
What the sources say
- Not matchedcites [7] 7. Brealey, R. A. and S. C. Myers, Principles of Corporate Finance, 2nd Ed., McGraw-Hill Book Co., New York, 1984.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The factors that make financial distress costly also make it difficult to escape.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“This cost is avoided if the firm can retain enough internally-generated cash to cover its positive-NPV opportunities.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“This is why firms in financial distress often do not rebalance their capital structures.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The gain in firm value from rebalancing is highest when the firm has gotten into deep trouble and lenders have absorbed a significant capital loss.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
In the paper
“New stock issues play a relatively small part.”
What the sources say
- Not matchedcites [7] 7. Brealey, R. A. and S. C. Myers, Principles of Corporate Finance, 2nd Ed., McGraw-Hill Book Co., New York, 1984.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
- Not matched
In the paper
“Aggregate investment outlays are predominantly financed by debt issues and internally-generated funds.”
What the sources say
- Not matchedcites [7] 7. Brealey, R. A. and S. C. Myers, Principles of Corporate Finance, 2nd Ed., McGraw-Hill Book Co., New York, 1984.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plaincorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Thus investors would effectively force the firm to follow a pecking order.”
hedgeddirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“But the firm which borrows against intangibles or growth opportunities may end up reducing their value.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The securities of growth firms may be excellent collateral.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Asymmetric information creates the possibility of a different sort of cost: the possibility that the firm will choose not to issue, and will therefore pass up a positive-NPV investment.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
- The authors state this as an assumption: The firm's manager knows x and y, while investors in capital markets do not and see only a joint distribution of possible values (x, y).
- The authors state this as an assumption: Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.
- The authors state this as an assumption: MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.
- The authors state this as an assumption: The information asymmetry is taken as given.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“If the firm does seek external funds, it is better off issuing debt than equity securities.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
- The authors state this as an assumption: The firm's manager knows x and y, while investors in capital markets do not and see only a joint distribution of possible values (x, y).
- The authors state this as an assumption: Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.
- The authors state this as an assumption: MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.
- The authors state this as an assumption: The information asymmetry is taken as given.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“In that case, rebalancing gives lenders a windfall gain.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The problem is not that intangibles and growth opportunities are risky.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
- Probably not a substantial claim. 13
- It may state two separate claims as one. 24
Every source the paper cites for this claim was checked and supports it.
In the paper
“Miller described an equilibrium of aggregate supply and demand for corporate debt, in which personal income taxes paid by the marginal investor in corporate debt just offset the corporate tax saving.”
What the sources say
- Supportedcites [27] 27. Miller, M., "Debt and Taxes," Journal of Finance, 32 (May 1977), 261-275. source
In Section IV, “Taxes and Market Equilibrium” (page unavailable), Miller describes an equilibrium level of aggregate corporate debt set by the intersection of bond demand and supply. The paper also explains that the bondholders’ personal-tax disadvantage can offset the corporate benefit of deductible interest one-for-one, leaving no gain from debt financing. (LLM, conf=0.91)
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim.
- Supported
Every source the paper cites for this claim was checked and supports it.
In the paper
“For example, Long and Malitz [21] found a significant negative relationship between rates of investment in advertising and research and development (R & D) and the level of borrowing.They also found a significant positive relationship between the rate of capital expenditure (in fixed plant and equipment) and the level of borrowing.”
What the sources say
- Supportedcites Long and Malitz [21] 21. Long, M. S., and E. B. Malitz, "Investment Patterns and Financial Leverage," Working Paper, National Bureau of Economic Research, 1983. source
Split into 2 atoms — 2 confirmed, 0 partially supported, 0 disputed, 0 misattributed, 0 unverifiable. Expand the claim to see per-atom verdicts.
plaincorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
- Supported
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“However, any firm paying a lower rate would see a net loss to corporate borrowing and a net gain to lending.”
hedgeddirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“But our theories don't seem to explain actual financing behavior, and it seems presumptuous to advise firms on optimal capital structure when we are so far from explaining actual decisions.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“However, there must be costs, and therefore lags, in adjusting to the optimum.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds. It may state two separate claims as one.
In the paper
“We know stock prices respond to unanticipated dividend changes, so it is clear that dividends have information content-this observation dates back at least to Miller and Modigliani (MM) in 1961 [28].”
What the sources say
- Not checked — no full text of the sourcecites [28] 28. Miller, M., and F. Modigliani, "Dividend Policy, Growth and the Valuation of Shares," Journal of Business, 34 (October 1961), 411-433. "Some Estimates of the Cost of Capital to the Electric Utility Industry, 1954-1957," American Economic Review, 56 (June 1966), 333-391. source
boosteddirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: unclear — It is unclear whether the paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“This fact is embarassing to static tradeoff advocates.If firm value rises, the debt-to-value ratio falls, and firms ought to issue debt, not equity, to rebalance their capital structures.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“For some firms this number is 46 cents, or close to it.At the other extreme, there are firms with large unused loss carryforwards which pay no immediate taxes.An extra dollar of interest paid by these firms would create only a potential future deduction, usable when and if the firm earns enough to work off prior carryforwards.The expected realizable tax shield is positive but small.”
plaincorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“If there were no costs of adjustment, and the static tradeoff theory is correct, then each firm's observed debt-to-value ratio should be its optimal ratio.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Given significant differences in effective marginal tax rates, and given that the static tradeoff theory works, we would expect to find a strong tax effect in any cross-sectional test, regardless of whose theory of debt and taxes you believe.”
hedgedcorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Thus the firm faces two increasing costs as it climbs up the pecking order: it faces higher odds of incurring costs of financial distress, and also higher odds that future positive-NPV projects will be passed by because the firm will be unwilling to finance them by issuing common stock or other risky securities.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
In the paper
“Masulis [23,24] has shown that stock prices rise, on average, when a firm offers to exchange debt for equity, and fall when they offer to exchange equity for debt.”
What the sources say
- Not matchedcites Masulis [23,24]
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
boosteddirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: unclear — It is unclear whether the paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Either firms take extended excursions from their targets, or the targets themselves depend on factors not yet recognized or understood.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“However, the evidence on risk and debt policy is not extensive enough to be totally convincing.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence. The paper’s conclusions may not depend on it.
In the paper
“They adapt their target dividend payout ratios to their investment opportunities, although dividends are sticky and target payout ratios are only gradually adjusted to shifts in the extent of valuable investment opportunities.”
What the sources say
- Not matchedcites [13] 13. Donaldson, G., Corporate Debt Capacity: A Study of Corporate Debt Policy and the Determination of Corporate Debt Capacity, Boston, Division of Research, Harvard Graduate School of Business Administration, 1961.
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: unclear — It is unclear whether the paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
- Not matched
In the paper
“On average, stock price falls when firms announce a stock issue.Stock prices rise, on average, when a stock repurchase is announced.This fact has been confirmed in several studies, including those by Korwar [11].”
What the sources say
- Not matchedcites Korwar [11]
Couldn’t be matched to a paper in Crossref, so it can’t be checked.
boostedcorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
- Not matched
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“I know of no study clearly demonstrating that a firm's tax status has predictable, material effects on its debt policy.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“For example, think of an unusually profitable firm in an industry generating relatively slow growth.That firm will end up with an unusually low debt ratio compared to its industry's average, and it won't do much of anything about it.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“However, a model based solely on this partial adjustment process would have a very low R2.Apparently the static tradeoff model captures only a small part of actual behavior.”
hedgeddirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“These results may make one a bit more comfortable with asymmetric information models of the kind sketched above, and thus a bit more comfortable with the pecking order story.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence. It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“For example, there is no satisfactory explanation of debt covenants unless agency costs and moral hazard problems are recognized.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Book values reflect assets-in-place (tangible assets and working capital).Market values reflect intangibles and growth opportunities as well as assets-in-place.”
plaincorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“But I think it is generally consistent with the empirical evidence.”
hedgedcorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence. The paper may give no reason why it holds.
The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“Costs of financial distress include the legal and administrative costs of bankruptcy, as well as the subtler agency, moral hazard, monitoring and contracting costs which can erode firm value even if formal default is avoided.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: unclear — It is unclear why the paper says it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“But issue costs in themselves do not seem large enough to override the costs and benefits of leverage emphasized in the static tradeoff story.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“It restrains itself for two reasons: first, to avoid any material costs of financial distress; and second, to maintain financial slack in the form of reserve borrowing power.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“They do not want to run the risk of falling into the dilemma of either passing by positive-NPV projects or issuing stock at a price they think is too low.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Any time an announcement affects stock price, we can infer that the announcement conveyed information.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper’s conclusions may not depend on it. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The static tradeoff story works to some extent, but it seems to have an unacceptably low R2.”
hedgedcorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Thus, firms do not set target book debt ratios because accountants certify the books.Book asset values are proxies for the values of assets in place.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Since many firms have market values far in excess of book values (even if those book values are restated in current dollars), we ought to see at least a few such firms operating comfortably at very high book debt ratios-and of course we do not.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Thus, although the theories tell different stories about aggregate supply and demand of corporate debt, they make essentially the same predictions about which firms borrow more or less than average.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“(If the manager's inside information is unfavorable, AN is negative and the firm will always issue, even if the only good use for the funds raised is to put them in the bank-a zero-NPV investment.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
- The authors state this as an assumption: The firm's manager knows x and y, while investors in capital markets do not and see only a joint distribution of possible values (x, y).
- The authors state this as an assumption: Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.
- The authors state this as an assumption: MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.
- The authors state this as an assumption: The information asymmetry is taken as given.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“I have presented it just to show how models based on asymmetric information can predict the two central ideas of the pecking order story: first, the preference for internal finance, and, second, the preference for debt over equity if external financing is sought.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
- The authors state this as an assumption: The firm's manager knows x and y, while investors in capital markets do not and see only a joint distribution of possible values (x, y).
- The authors state this as an assumption: Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.
- The authors state this as an assumption: MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.
- The authors state this as an assumption: The information asymmetry is taken as given.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“because we lack an objective proxy for changes in the degree of asymmetry.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence.
The authors state this as an assumption.
Managers have special information that investors do not have.
“if one starts by assuming that managers have special information, builds a model of how that information changes financing choices, and predicts which choices will be interpreted by investors as good or bad news, then some progress has been made.”
The authors state this as an assumption.
The customary assumptions of option pricing models hold when default risk is introduced.
“Even if default risk is introduced, the absolute value of AN will be less for debt than for equity if we make the customary assumptions of option pricing models.”
The authors state this as an assumption.
The firm's manager knows x and y, while investors in capital markets do not and see only a joint distribution of possible values (x, y).
“The firm's manager knows what x and y are, but investors in capital markets do not: they see only a joint distribution of possible values (x, y).”
The authors state this as an assumption.
Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.
“Aside from the information asymmetry, capital markets are perfect and semi-strong form efficient.”
The authors state this as an assumption.
MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.
“MM's Proposition I holds in the sense that the stock of debt relative to real assets is irrelevant if information available to investors is held constant.”
The authors state this as an assumption.
Changes in firm value are lognormally distributed.
“This amounts to assuming that changes in firm value are lognormally distributed, that managers and investors agree on the variance rate, and that managers know the current value of x + y but investors do not.”
The authors state this as an assumption.
Managers and investors agree on the variance rate.
“This amounts to assuming that changes in firm value are lognormally distributed, that managers and investors agree on the variance rate, and that managers know the current value of x + y but investors do not.”
The authors state this as an assumption.
Managers know the current value of x + y but investors do not.
“This amounts to assuming that changes in firm value are lognormally distributed, that managers and investors agree on the variance rate, and that managers know the current value of x + y but investors do not.”
The authors state this as an assumption.
New shares or risky debt would be underpriced in the example.
“This example assumes that new shares or risky debt would be underpriced.”
The authors state this as an assumption.
If the firm always has a zero-NPV opportunity available to it, the distribution of y is truncated at y = 0.
“If the firm always has a zero-NPV opportunity available to it, the distribution of y is truncated at y = 0.”
The authors state this as an assumption.
x is non-negative.
“I also assume that x is non-negative.”
The authors state this as an assumption.
The information asymmetry is taken as given.
“The information asymmetry is taken as given.”
The authors state this as an assumption.
The information asymmetry applies to both the investment project and the firm without the project.
“The information asymmetry applies to both goods-for example, the manager may receive inside information that amounts to good news about x and bad news about y, or vice versa, or good or bad news about both.”
Self-check
Percentages, sums and reported differences re-computed from the paper’s own numbers.
Each contradiction between two passages listed here was confirmed by an independent check.
Rated minor: it would not touch a result — a value no result rests on, a p-value that stays on the same side of the significance level, or a conflict that is clerical, resolved elsewhere in the paper, or outside its own findings.
In the paper
§ The Journal of Finance
“This fact has been confirmed in several studies, including those by Korwar [11].”
§ References
“19. Korwar, A. N., "The Effect of New Issues of Equity: An Empirical Examination," Working Paper, University of California, Los Angeles, 1981.”
Rated minor: it would not touch a result — a value no result rests on, a p-value that stays on the same side of the significance level, or a conflict that is clerical, resolved elsewhere in the paper, or outside its own findings.
In the paper
§ Conclusion
“Jalilvand and Harris[16], for example.”
§ References
“17. Jalilvand, A. and R. S. Harris, "Corporate Behavior in Adjusting Capital Structure and Dividend Policy: An Econometric Study," Journal of Finance, 39 (March 1984), 127-145.”
Citations
Cites
Theory of the firm: Managerial behavior, agency costs and ownership structure
Jensen, M. C., & Meckling, W. H. (1976) · Journal of Financial Economics · doi:10.1016/0304-405x(76)90026-x · Cited by 71,491
The Market for "Lemons": Quality Uncertainty and the Market Mechanism
Akerlof, G. A. (1970) · The Quarterly Journal of Economics · doi:10.2307/1879431 · Cited by 23,016
Corporate financing and investment decisions when firms have information that investors do not have
Myers, S. C., & Majluf, N. S. (1984) · Journal of Financial Economics · doi:10.1016/0304-405x(84)90023-0 · Cited by 18,957
Self-citationThe Cost of Capital, Corporation Finance and the Theory of Investment
Miller, M. H. (1958) · American Economic Review · Cited by 14,574
Determinants of corporate borrowing
Myers, S. C. (1977) · Journal of Financial Economics · doi:10.1016/0304-405x(77)90015-0 · Cited by 13,169
Self-citationThe cost of capital, corporation finance and the theory of investment
Terra, P. R. S. (2008) · BASE - Revista de Administração e Contabilidade da Unisinos · doi:10.4013/base.20082.07 · Cited by 9,281
The Modern Corporation and Private Property
Kline, J. V., Berle, A. A., & Means, G. C. (1933) · Columbia Law Review · doi:10.2307/1115736 · Cited by 7,445
Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have
Myers, S., & Majluf, N. (1984) · doi:10.3386/w1396 · Cited by 6,745
Self-citationDividend Policy, Growth, and the Valuation of Shares
Miller, M. H., & Modigliani, F. (1961) · The Journal of Business · doi:10.1086/294442 · Cited by 6,558
The Determination of Financial Structure: The Incentive‐Signalling Approach,
Ross, S. A. (1977) · The Bell Journal of Economics · doi:10.2307/3003485 · Cited by 4,168
Research works printed but not linked: 1
- Myers S., 1984, The Search for Optimal Capital Structure,, Midland Corporate Finance Journal, 1, 6
Cited by
Sorted by citations
What Do We Know about Capital Structure? Some Evidence from International Data
RAJAN, R. G., & ZINGALES, L. (1995) · The Journal of Finance · doi:10.1111/j.1540-6261.1995.tb05184.x · Cited by 6,538
The theory and practice of corporate finance: evidence from the field
Graham, J. R., & Harvey, C. R. (2001) · Journal of Financial Economics · doi:10.1016/s0304-405x(01)00044-7 · Cited by 5,951
Outside directors and CEO turnover
Weisbach, M. S. (1988) · Journal of Financial Economics · doi:10.1016/0304-405x(88)90053-0 · Cited by 4,275
The Theory of Capital Structure
Harris, M., & Raviv, A. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb03753.x · Cited by 4,371
CEO Overconfidence and Corporate Investment
Malmendier, U. M., & Tate, G. A. (2005) · The Journal of Finance · doi:10.1111/j.1540-6261.2005.00813.x · Cited by 3,645
Metadata
- Authors
- MYERS, S. C.
- Affiliations
- National Bureau of Economic Research (US)
- Corresponding author
- MYERS, STEWART C.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1984-07
- Volume
- 39
- Issue
- 3
- Pages
- 574-592
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2170790204
- Cited by
- 7,526
- References
- 43
- Citations by year
- 2026: 117 · 2025: 159 · 2024: 234 · 2023: 324 · 2022: 285 · 2021: 381 · 2020: 413 · 2019: 391 · 2018: 381 · 2017: 342 · 2016: 391 · 2015: 439 · 2014: 394 · 2013: 378 · 2012: 376
- FWCI
- 102.04
- Type
- journal article
- Language
- en
- Open access
- bronze
- doi.org
- Locations
- The Journal of Finance (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
- Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
- Social Sciences › Business, Management and Accounting › Strategy and Management › Financial Reporting and Valuation Research
- Keywords
- capital structure puzzle, managerial capitalism, separation of ownership and control, agency theory, corporate financing decisions, investment decision-making, Modigliani-Miller theorem
About these checks
Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.
A language model drew the claims from the paper on 2026-10-11, under version 3 of the claim definition (model deepseek-v4.1-flash, prompt extract-v3).
A second model labelled each claim on 2026-10-11 (model jev-1.13-20260917, definition revision gold-guideline-v0.2).
Cited sources are checked with a language model’s help (gpt-6-sol).
Statistics and arithmetic are recomputed, not judged.
Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.
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