Asymmetric capital structure adjustments: New evidence from dynamic panel threshold models

► We develop a dynamic panel threshold model to test the dynamic trade-off theory. ► Our model allows for both short- and long-run asymmetries in capital structure adjustments. ► We consistently estimate heterogeneous speeds of adjustment. ► We propose a bootstrap-based testing procedure for the threshold effect. ► Results provide UK evidence of asymmetries in adjustment towards target leverage.