Assets on the Move, Leverage in Flux: How Asset Redeployability Shapes Leverage Adjustments

ABSTRACT Firms possessing more redeployable assets, defined as assets with a higher potential for alternative uses outside the firms, tend to adjust their capital structure toward the optimal level more quickly. This association between asset redeployability and leverage adjustments is particularly pronounced for financially constrained firms. Moreover, we note that the faster speed of leverage adjustment (SOA) associated with asset redeployability translates into higher firm value. We address potential endogeneity concerns by utilizing plausibly exogenous shocks to economic uncertainty, captured through major economic, and political events.