TY - JOUR
AU - Silberman, Irwin H.
AB -  ’ JUNE 1977 JOINT DETERMINATION OF RATE OF RETURN AND CAPITAL STRUCTURE: AN ECONOMETRIC ANALYSIS T. AND H. WILLARD CARLETON IRWIN SILBERMAN* I. INTRODUCTION CONCLUSION AND MANY STUDIES in recent years have noted that-contrary to intuition and received theory-financial leverage (measured as the book value .of debt/capital or debt/equity) and mean rates of return on equity vary inversely among firms and industries. Hall and Weiss (1967) and Gale (1972) found this phenomenon using corporate book earnings to compute rate of return, whereas Arditti (1967) and Nerlove (1968) generated similar results using stockholder returns. Recently, Baker (1973), utilizing corporate profits as his measure, also found the “wrong” sign for leverage effects in a single equation model but the “correct” sign in a simultaneous equations model. Unfortunately, the book rate of return on equity already reflects corporate financing choices made in light of underlying operating profit and risk characteristics. It is a principal proposition of this study that a more fruitful line of approach is to examine the relationship between these characteristics and the capital structure decision. Our findings, based on this approach are: a. Straightforward finance-theoretic considerations suggest and our evidence confirms that an industry’s average book rate of 
TI - JOINT DETERMINATION OF RATE OF RETURN AND CAPITAL STRUCTURE: AN ECONOMETRIC ANALYSIS
JF - The Journal of Finance
DO - 10.1111/j.1540-6261.1977.tb01990.x
DA - 1977-06-01
UR - https://www.deepdyve.com/lp/wiley/joint-determination-of-rate-of-return-and-capital-structure-an-TM9nHGtVGE
SP - 811
VL - 32
IS - 3
DP - DeepDyve
ER -