Corporate Capital Structures in the United States (National by Benjamin M. Friedman (ed.)

By Benjamin M. Friedman (ed.)

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Long-term capital fluctuate but exhibit virtually no trend through the mid-1950s. 7 Data that were not available to Miller at the time of his study, however, suggest that debt ratios have tended to drift steadily upward since the late 1950s. This may indicate a fundamental change in corporate financial policy, although Miller (1977) has warned that at least some of this apparent trend may be spurious. Liberalized depreciation allowances since the early 1960s, for example, would tend to depress reported equity values and would automatically tend to increase debt ratios.

02 — — Sources: Cited in text. "Figure in parentheses is from Goldsmith (1956). Other figure is from Goldsmith et al. (1963). b Gordon and Malkiel (1981) update von Furstenberg's figures, using the same estimation method, through 1978. They do not report figures for preferred stock, however. 05 - i 1900 — — i 05 i 10 i 15 i 20 i 25 I 30 i 35 i 40 i 45 i 50 I 55 \ 60 \ 65 i 70 r 75 I 80 D/A, Goldsmith data —••-— D/A, von Furstenberg data Fig. 3. cades, after a relatively flat period in the 1940s and 1950s, they are nevertheless not unusual by prewar standards.

5 Effect on Corporate Debt of an Increase in Summary of Effects on Corporate Debt of Various Factors in Different Capital Structure Models Model Tax SavingsBankruptcy Costs Agency Costs Miller Miller with Agency Costs Corporate tax rate More debt Taxes not applicable Probably more debt Probably more debt Corporate & personal tax rates combined Personal taxes not applicable Taxes not applicable Ambiguous Ambiguous Inflation More debt No effect No effect More debt Supply of tax-exempt bonds No effect No effect More debt More debt Supply of noncorporate taxable bonds No effect No effect Less debt Less debt Costs associated with corporate debt Less debt Less debt Debt costs not applicable Less debt Future investment opportunities relative to assets-inplace No effect Less debt No effect Less debt 44 Robert A.

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