Target Leverage Ratio

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Target Leverage Ratio

The ratio of the market value of debt to the total market value of the firm that management seeks to maintain.

Target Leverage Ratio

The level of debt that a company wishes to maintain expressed as a percentage of its market value. Some companies are more comfortable with debt than others. Increased leverage increases the risk to a company, but can increase returns.
References in periodicals archive ?
However, consistent with the company's prior practice, proceeds will be applied to debt reduction until target leverage ratios have been achieved.
Based on the company's estimate of the market value of the plants, Constellation Energy should be at its target leverage ratios upon completion of the divestiture.
We also control for the impact of the target leverage ratio on financing decisions using the approach outlined in Hovakimian, Opler, and Yitman (2001) who examine the debt-equity choice.
To test whether the correlation between previous price run-ups and equity issuances documented in the US setting also exist in Japan, we again follow the approach by Hovakimian, Opler, and Yitman (2001) (outlined above), which explicitly controls for the impact of target leverage ratio on financing decisions.
Target leverage ratio is the ratio (DEVI) fitted value of the regression where TDB is regressed on the vector of control variables (X) in Equation (10), together with year and industry indicator variables.