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It is the objective of’ this article to present evidence on whether the importance of financial structure of the firm has in practice been confirmed by corporate decision makers. It is hypothesized that, if the financing decision is critical with respect to the valuation of the firm, then decision makers in various groups have recognized this fact and developed financial structures suited to their particular business risk.
We uses the ratio of book value of equity to total assets to measure financial structure, and we found a greater variance in financial structure among industry groups than within industry groups, except in 1378 and
1380.
The null hypothesis is rejected at the 5% level of significance in each of the 6 years lested (except 1378 and 1380). It is also consistent with the nation that firms with similar risk characteristics my develop similar “optimal” financial structures.