Instructions
Read the journal article titled ‘What Do We Know about Capital Structure? Some
Evidence from International Data’ by Raghuran Rajan and Luigi Zingales, and
prepare a group presentation to discuss the following two questions:
(a pdf version is available on Blackboard on the Week 10 page)
Questions
a) Rajan and Zingle (1995) finds that firms in the United Kingdom and Germany
appear to be substantially less leveraged than firms in the other G7 countries.
Based on your reading, discuss the institutional difference across those
countries and how it affects the leverage choice.
b) Apart from the institutional difference across countries, Rajan and Zingle
(1995) further investigate the impact of cross-sectional differences across
firms in a country on the leverage choice. Based on your reading, discuss
those cross-sectional factors at the firm level and their relation to the optimal
capital structure choice. Also include the theorical background behind those
relations.
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