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Unformatted text preview: 2002). greater role in corporate financing than has been the case in other countries. In
most European countries and especially in Japan and other Pacific Rim nations,
large commercial banks are more actively involved in the financing of corporate
activity than has been true in the United States. Furthermore, in many of these
countries, banks are allowed to make large equity investments in nonfinancial corporations—a practice that is prohibited for U.S. banks. Finally, share ownership
tends to be more tightly controlled among founding-family, institutional, and even
public investors in Europe and Asia than it is for most large U.S. corporations.
Tight ownership enables owners to understand the firm’s financial condition better, resulting in their willingness to tolerate a higher degree of indebtedness.
On the other hand, similarities do exist between U.S. corporations and corporations in other countries. First, the same industry patterns of capital structure
tend to be found all ar...
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