{"title":"Common Problems in Capital Structure Research: The Financial-Debt-To-Asset Ratio, and Issuing Activity vs. Leverage Changes","authors":"I. Welch","doi":"10.2139/ssrn.931675","DOIUrl":"https://doi.org/10.2139/ssrn.931675","url":null,"abstract":"This paper points out two common problems in capital structure research. First, although it is not clear whether they should be considered debt, non-financial liabilities should never be considered as equity. Yet, the common financial-debt-to-asset ratio (FD/AT) measure of leverage commits exactly this mistake. Thus, research that explains increases in FD/AT explains, at least in parts, decreases in non-financial liabilities. Future research should avoid FD/AT altogether. Second, equity issuing activity should not be viewed as equivalent to capital structure changes. Empirically, the correlation between the two is weak. The capital structure and capital issuing literature are distinct.","PeriodicalId":275179,"journal":{"name":"Financial Structure","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116844267","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}