We document that firms decrease their leverage when they convert growth options into tangible assets. This is contrary to the predictions of both a standard trade-off model and pecking order theory. We argue that the act of option conversion decreases information asymmetry about the firm, which in turn reduces the relative cost of issuing informationsensitive securities such as equity. Thus, firms engaging in high growth experience a decline in leverage. Empirically, we establish the result using several plausible proxies of growth option conversion such as capital expenditure, employee growth, and a relative decline in research and development expenses. We show that the result also holds for a sub-sample of oil and gas firms for which the number of development drilling rigs provides a direct measure of growth option exercise. Our results are not driven by well-known empirical drivers of capital structure such as firm size, collateral availability, past profitability, or market timing. Overall, our work implies that it is important to consider endogenous changes in the information sensitivity of a firm’s assets to understand its leverage and financing choices.