Surveys conducted of managers tell us that they primarily use regular cash dividends to precisely adjust the leverage ratio to the target suggested by the trade-off theory of capital structure.

Question

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While the trade-off theory suggests a target capital structure, surveys have shown that managers primarily rely on other tools such as debt issuance and share repurchases to adjust leverage levels, rather than using regular cash dividends.

Surveys Conducted of Managers Tell Us That They Primarily Use