This studyanalyzes the heterogeneity in the speed of adjustment of leverage ratios subsequent to shocks. Using a sample of firms from the G-7 countries, we estimate capital structure adjustment speeds using a wide range of different dynamic panel methodologies. Themean estimated speed of adjustment is 20% per year, which corresponds to a shock’s half-life of about three years. We com-pare adjustment speeds in both market-and bank-based economies and show that firms from market-based countries rebalance faster afterleverage shocks. Investigating the firm-level determinants of adjustment speed, our findings indicate that highly over-leveraged firms, firms with a higher financing deficit, and constrained firms exert adjustment with a faster speed. Finally, the macroeconomic envi-ronment has an impact on the speed of adjustment. Firms adjust more slowly during bad macroeco-nomic states, and the adjustment dynamics exhibit managerial market-timing behavior.