Table 1 Leverage pattern across firm’s life cycle as suggested by capital structure theories
Capital structure theories | Leverage pattern | ||
|---|---|---|---|
Growth | Maturity | Decline | |
Pecking order theory | High | Low | High |
Trade-off theory | Low | High | Low |
Agency cost theory | Low | High | High |
Diamond’s theory | Low | High | High |
Market timing theory | ? | ? | ? |