Question

Which of the following factors is least likely to lead to higher financial leverage in the capital structure of companies?

a) Stronger legal systems.
b) High levels of information asymmetry.
c) Higher personal tax rates on dividends.
d) Low interest rates on debt.

Answer 1

Stronger legal systems are the least likely factor to lead to higher financial leverage in a company's capital structure.

Step-by-step explanation:

The factor least likely to lead to higher financial leverage in the capital structure of companies is a) Stronger legal systems. Stronger legal systems provide a stable and reliable environment for businesses, reducing the likelihood of financial distress and the need for high financial leverage. Companies operating in countries with stronger legal systems are more likely to have lower levels of debt compared to those in countries with weaker legal systems.