ABSTRACT
Second, capital structures display industry patterns that are similar around the world. Utilities, transportation companies, and capital-intensive manufacturing fi rms have high debt-to-equity ratios as opposed to service fi rms, mining companies, and technology-based manufacturing fi rms which employ very little long-term debt, if at all they employ some. Third, within industries, leverage is inversely associated with profitability. This evidence contradicts the tax-based capital structures theories which predict that more profitable firms should borrow more intensively to reduce their tax load. One interpretation of this pattern is that capital structure may not necessarily arise from a deliberate policy choice but may be rather an artifact of historic profitability and dividend policy.
