#2215. To be or not to be all-equity for firms that eliminate long-term debt

July 2026publication date
Proposal available till 30-05-2025
4 total number of authors per manuscript3510 $

The title of the journal is available only for the authors who have already paid for
Journal’s subject area:
Finance;
Economics and Econometrics;
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Abstract:
Despite the advantages of debt, a significant number of firms that have an established leverage policy deliberately become all-equity. These firms eliminate a substantial amount of long-term debt as the average firms leverage ratio is approximately 30 percent at the year-end prior to debt elimination. Firm-level “shocks” such as CEO turnover and changes in credit ratings cannot explain the dramatic recapitalization decision. Consistent with the tradeoff theory, firms that eliminate debt have lower benefits (less tax shield benefits, agency costs) and higher costs (probability of financial distress, access to capital markets, etc.) of leverage in the three prior years compared to a matched sample.
Keywords:
Capital structure; Long-term debt elimination

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