How Firm Characteristics Affect Capital Structure: An International Comparison
Posted: 20 Dec 1998
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Abstract
This empirical study examines the determinants of firms' capital structures in the U.S. and four other countries. A number of theories are tested against these empirical results. Comparing capital decision factors across countries, many differences appear in the correlation between debt/asset ratios and the firms' riskiness, profitability, size and growth. These correlations can be explained by differences in tax policies and agency problems, including differences in bankruptcy costs, information asymmetries and shareholder/creditor conflicts. The study attempts to link these agency problems to legal and institutional differences across countries.
JEL Classification: G32
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