Asymmetric peer effects in capital structure dynamics

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Using a semiparametric smooth-coefficient partial adjustment model, this study finds evidence for asymmetric peer effects on capital structure adjustment speeds between overlevered and underlevered firms. Overlevered firms’ adjustment speeds and peer firm shocks have a U-shaped relationship, while underlevered firms’ adjustment speeds monotonically increase with peer firm shocks.

Original languageEnglish
Pages (from-to)17-22
Number of pages6
JournalEconomics Letters
StatePublished - Mar 2019


  • Capital structure
  • Leverage dynamics
  • Peer effects
  • Speed of adjustment


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