Using two dynamic partial adjustment capital structure models to estimate the impact of several macroeconomic factors on the speed of capital structure adjustment toward target leverage, we find evidence that firms adjust their leverage toward target faster in good macroeconomic states relative to bad states. This evidence holds whether or not firms are subject to financial constraints. Our results are robust to an alternative method of calculating states and to omitting zero-debt boundary firms and are not driven by firm size, deviation from target, or leverage definitions.

Why do firms deviate from a one share-one vote regime when going public? This question raises considerations that are at the core of many corporate governance issues. We consider three arguments for this choice. Examining data on IPOs from 1980 through 2008, we do not find that firms go public with dual class stock so managers have more incentive to invest in hard to monitor projects nor to gain more when selling control of the firm. Rather, managers appear to take their firms public with dual class stock in order to retain control of their firms while reducing their lack of diversification costs.