Recent research has found that macroeconomic conditions are important factors in analyzing firms’ financing choices as well as the adjustment behaviors of the capital structure. This study analyze whether the most recent financial crisis of 2007-2009 has impacts on the implementation of trade-off theory for capital structure. We find evidence that firms adjust their capital structure toward target leverage ratio slower during the crisis years, in particular for the over-levered firms. Furthermore, we find that over-levered firms prefer reduce leverage by debt retirement. Hence, the detrimental effect of financial crisis on adjustment speed is more significant for over-levered firms with lower cash holdings and worse operating performance during crisis years. This study thus sheds light on the importance of financial flexibility during the crisis years through capital structure adjustment mechanism.