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This paper analyzes a large sample of public security offerings to determine the motivation to issue debt or common equity. The results provide new evidence that the existence of asymmetric information plays a key role in firms' choice of security. Bankruptcy risk appears to affect the issue decision, but other traditional capital structure considerations do not. Variations in the determinants of security choice over time suggest a dynamic aspect to capital structure decisions not recognized in previous studies.
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Bayless et al. (1994) studied this question.
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