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This research paper analyses the capital structure of firms. When do firms rebalance their capital structure? A sample of 114 Belgian quoted companies is used to investigate the behaviour of leverage. First, the optimal leverage level is estimated. In this research the size, growth and profitability are found to have a significant negative impact on the leverage level of a firm. The tangibility of assets has a significant positive relation with leverage. Next, capital structure rebalancing is analysed. The growth opportunities and the distance between the optimal and current leverage are observed to have a significant impact on the probability of leverage adjustments.