Corporations and corporations in other countries

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Unformatted text preview: ound the world. For example, in nearly all countries, pharmaceutical and other high-growth industrial firms tend to have lower debt ratios than do steel companies, airlines, and electric utility companies. Second, the capital structures of the largest U.S.-based multinational companies, which have access to many different capital markets around the world, typically resemble the capital structures of multinational companies from other countries more than they resemble those of smaller U.S. companies. Finally, the worldwide trend is CHAPTER 12 Leverage and Capital Structure 525 away from reliance on banks for corporate financing and toward greater reliance on security issuance. Over time, the differences in the capital structures of U.S. and non-U.S. firms will probably lessen. Capital Structure Theory Scholarly research suggests that there is an optimal capital structure range. It is not yet possible to provide financial managers with a specified methodology for use in determining a firm’s optimal capital s...
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