Barclay,Smith and Watts (1995)found That

question 19

Multiple Choice

Barclay,Smith and Watts (1995) found that:

• A)the relationship between leverage and the market-book value ratio was highly significant in a statistical sense but was not 'economically' significant.
• B)taxes do not have an important effect on corporate leverage decisions.
• C)their findings are consistent with the pecking order theory because they show that leverage is negatively related to profitability.
• D)leverage was positively related to the tangibility of assets and negatively related to the market-book value ratio in seven countries.

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Definitions:

Double Coincidence of Wants

A situation in a barter system where two parties each hold an item the other wants, allowing them to exchange goods directly without the need for money.

M1

A category of the money supply that includes physical currency and coin, demand deposits, traveler's checks, and other checkable deposits.

Travelers Checks

Pre-printed, fixed-amount checks designed to allow the person signing them to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.

Reserve Ratio

The fraction of deposits that banks are required to keep on hand as reserves, either in their vaults or with the central bank, to ensure liquidity.