In the reading “Capital structure”, i’m confused about these statements: 1/ Companies in higher-inflation countries usually exhibit lower levels of financial leverage… & have a shorter debt maturity structure… - I thought that in high-inflation countries, wealth is transfered from debt holders to issuers, so companies will take benefits from using higher leverage? 2/ Companies in countries with high GDP growth rely more on equity financing. - I do not know the reason :-? Plz help me
In my opinion, I think
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In high-inflation countries, loan interest rate increase -> debt is more expensive -> uses lower levels of financial leverage.
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In countries has high GDP growth rate -> interest rate is lower -> saving money don’t attract people who have free cash -> they can invest in market securities.