HOW FIRM CHARACTERISTICS AFFECT CAPITAL STRUCTURE: AN INTERNATIONAL COMPARISON

In this empirical study I examine the factors correlated with capital structure in the United States, Japan, United Kingdom, France, and Germany. Although both mean leverage and many firm factors appear to be similar across countries, some significant differences remain. Specifically, differences appear in the correlation between long-term debt/asset ratios and the firms' riskiness, profitability, size, and growth. These correlations may be explained by differences in tax policies and agency problems, including differences in bankruptcy costs, information asymmetries, and shareholder/creditor conflicts. The findings of this study suggest links between varying choices in capital structure across countries and legal and institutional differences.

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