We investigate the capital structure and the dynamic behavior of firms' debt ratios in a large sample of companies from 52 countries. Our results support a complex view of capital structure decisions, where firm, macroeconomic, and institutional factors interact in determining both the optimal leverage and the adjustment process towards it. These interactions contribute for almost two thirds of the explained heterogeneity of the target leverage and around one third of the speed of adjustment. Overall, our results suggest that market timing and pecking order arguments prevail in the short-run, while dynamic trade-off with costly readjustment matters mainly in the long-run.