Note(s): Table 2 Panel A reports the baseline regression. Panel B reports evidence using the baseline regression without zero-leveraged firms. Panel C and D report the findings excluding healthcare firms and for distressed firms respectively. Book Dev is defined as the book target ratio minus the book leverage ratio from the previous quarter. Similarly, Market Dev is defined as the market target ratio minus the market leverage from the previous quarter. The target ratio is estimated from Eq. (3). PreCOVID and COVID samples range between 2018Q3-2020Q1 and 2020Q2-2021Q4 respectively. Robust standard errors are presented in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1 signifies significance at 1%, 5%, and 10% respectively

$LevRi,t−LevRi,t−1=DebttATQt−Debtt−1ATQt−1=λ(LevRi,t*−LevRi,t−1)+ϵ∼i,t$

$LevRi,t−LevRi,t−1=λ(LevRi,t*−LevRi,t−1)+ϵ∼i,t$

Source(s): Table by authors