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The paper documents a positive relation between expected future profitability and financial leverage ratio, which provides direct empirical support for the traditional tradeoff theory of capital structure. The result is established by looking at firms experiencing import competition shocks.
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This page is a summary of: Profitability and capital structure: Evidence from import penetration, Journal of Financial Economics, November 2012, Elsevier,
DOI: 10.1016/j.jfineco.2012.05.015.
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