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| Author: | Chung, K. H. |
| Title: | Asset characteristics and corporate debt policy: an empirical test. |
| Journal: | Journal of Business Finance and Accounting
1993 : JAN, VOL. 20:1, p. 83-98 |
| Index terms: | GEARING ASSETS CORPORATE FINANCE RISK EMPIRICAL RESEARCH |
| Language: | eng |
| Abstract: | This study examines the empirical relationship between the firm's asset characteristics and financial leverage, based on hypotheses derived from the agency theory literature. This study finds that: (i) the firm with a higher asset diversification and a larger fixed asset ratio tends to use more long-term debt; (ii) the firm with greater growth opportunities and a higher operating risk tends to use less short- and long-term debt; and (iii) the firm in regulated industries uses more long-term debt. In addition to the firm's intrinsic operating risk, author finds that managerial risk aversion, under-investment and asset substitution problems play important roles in the determination of corporate financial structures. |
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