We examine the relationship between customer concentration and capital structure adjustment speed using a sample of US listed firms from 1977 to 2020. We found that the customer-concentrated firms have a lower speed of leverage adjustment. Customer concentration affects leverage adjustment speed mainly through increased cash flow volatility and asset specificity. The negative association is more pronounced in firms with high relationship-specific investments and low switching costs for their customers. Stock market reacts to leverage deviation strongly for firms with concentrated customers. Our findings highlight the vital role of customers as key stakeholders in capital structure decisions.

This study examines how firm-level exposure to the COVID-19 pandemic affects the speed of leverage adjustment among 3260 US-listed firms from 2019q1 to 2022q1. Using a novel measure of COVID-19 exposure, we find that higher exposure significantly reduces the speed at which firms adjust their leverage towards target levels. This effect is more pronounced for financially constrained firms and those operating in competitive markets. We further show that COVID-19 exposure adversely impacts corporate liquidity, default risk, and financial flexibility. Our findings highlight the role of exogenous shocks in shaping corporate financing decisions.

We study how government intervention in the bank loan granting process affects firms’ leverage dynamics. We exploit the setup of administrative approval centers (AACs) in China, a program aiming to reduce bureaucracy in business activities, as a quasi-natural experiment. On average, AACs help to shorten the leverage rebalancing period by as much as a quarter. This acceleration pattern persists in under-leveraged firms, which issue more debt to rebalance accordingly. Cross-sectional analyses show that the positive effect of AACs on leverage adjustment is more pronounced for firms that are in poorer legal environment, with more financial constraints, or less politically connected. ics.