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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