Evidence on the Existence and Determinants of Inter-Industry Differences in Leverage

question of the existence of optimal capital structure. Under certain assumptions,' Miller demonstrates that, while a unique optimal level of aggregate debt exists for the corporate sector as a whole, leverage and value at the individual firm level are independent. In a recent paper, DeAngelo and Masulis (DM) [3] generalize the Miller leverage irrelevancy theorem to incorporate risky debt. The theorem is shown to hold under alter-