London Graduate School of Business Studies. We are grateful to the Bank of England's Houblon Norman Fund and the Institute of Finance and Accounting of the London Business School for financial support. We would like to thank J. Smithers for helpful advice and research support in our data collection and P. Hopper for programming assistance. Prof. R. A. Brealey has made numerous comments and suggestions that have proved most valuable. We are grateful to Panmure, Gordon & Co. for assistance in data collection. Also Prof. S. Myers and members of an L.B.S. Finance and Accounting Seminar provided useful suggestions and criticism of an earlier draft. Any errors remaining are our own.