tal e Structure.pdfVIP

Capital Structure - Evidence Historical Trends Table 1. Flow of Funds Data: Precentage of Total Financing Accounted for by Particular Sources of Funds, U.S. Nonfinancial Corporations Period 1901-12 1913-22 1923-29 1930-39 1940-45 1946-59 1960-69 1970-79 Total Debt 31 29 26 -33 15 30 36 45 Short-Term New Stock Debt Issues 8 14 17 11 4 19 ? 19 20 5 14 5 18 2 24 3 Internal Funds 55 60 55 114 80 64 62 52 Source: Taggart in B. Friedman, (ed.): Corporate Capital Structure in the United States, 1985. Important Points: (1) Debt has accounted for a larger fraction of total financing since the mid-1960s than was the case earlier (especially since the late 1920s). (2) The increased use of debt seems largely attributed to an increase in shortterm liabilities. In general, short-term liabilities show considerable flactuations. (3) Equity financing is going down (much of the increase in the 1970’s is accounted for by public utilities oreferred stock issuance. (4) No apparent trend in internal funds financing. Table 2. Debt to Value Ratios for 25 Industries, Ranked in Ascending Order Industry Number of Firms in Industry Sample Debt to Value Ratio1 Mean (Standard Deviation) DrugsCosmetics Instruments Metal Mining Publishing Electronics Machinery Food Petroleum Exploration Construction Petroleum Refining Metal Working Chemicals Apparel Lumber Motor Vehicles Parts Paper Textile Mill Products Rubber Retail Dept Stores Retail Grocery Stores Trucking2 Steel Telephone2 Elec. Gas Utilities2 Airlines2 31 27 23 16 77 80 50 24 12 31 33 47 18 7 52 24 21 26 20 16 10 45 10 135 16 .0907 (.095) .1119 (.086) .1347 (.099) .1552 (.169) .1579 (.121) .1957 (.114) .2056 (.128 .2258 (.151) .2384 (.151) .2436 (.121) .2502 (.139) .2544 (.135) .2603 (.123) .2605 (.182) .2714 (.138) .2895 (.114) .3257 (.133) .3262 (.167) .3433 (.150) .3460 (.187) .3730 (.209) .3819 (.195) .5150 (.097) .5309 (.241) .5825 (.171) Source: Bradley Jarrell and Kim Journal of Finance, 1984. 1 - Calculated as the 20-year (1962-1981