Intra-Industry Capital Structure Dispersion


  • Carlos A. Molina thanks the support from the IESA and UT-San Antonio. We thank the editor (Daniel Spulber), the coeditor, two referees, Arturo Bris, Ty Callahan, Allan Campbell, Murray Carlson, David Chapman, Judith Chevalier, Kent Daniel, Adolfo de Motta, Mathew Faulconer, Zsuzsanna Fluck, Ron Giammarino, Mariassunta Giannetti, Charles Hadlock, Jay Hartzell, Eric Higgins, Ayla Kayhan, Robert Parrino, Chris Parsons, Raghuram Rajan, Rafael Repullo, Jay Ritter, Paola Sapienza, Laura Starks, Suresh Sundaresan, Eduardo Walker, Jeff Wurgler, participants at the Third Texas Finance Festival at San Antonio, the 2001 European Summer Symposium in Financial Markets in Gerzensee, the First Oxford Financial Research Summer Symposium, ITAM Mexico, IESA Venezuela, Michigan State University, The University of Arizona, The University of Florida, The University of Houston, UT-Austin, UT-San Antonio, Yale University, and especially Alberto Abadie and Sheridan Titman for their useful comments and numerous conversations. Any remaining errors are our sole responsibility.


Why do firms in some industries exhibit very similar debt ratios, while firms in other industries do not? This paper examines the dispersion in leverage ratios among firms within an industry, and relates this dispersion to industry characteristics. We find that more concentrated industries and industries where the use of leasing is more intense exhibit greater intra-industry dispersion. We also document greater dispersion in industries where firms use less incentive compensation, sit more insiders in their boards, are older, and have larger capital expenditures in relation to their assets.