EQUITY OWNERSHIP AND THE 2 FACES OF DEBT

We empirically investigate the relation between corporate value, lever age, and equity ownership. For 'high-growth' firms corporate value is negatively correlated with leverage, whereas for 'low-growth' firms co rporate value is positively correlated with leverage. The results also hint that the allocation of equity ownership among insiders, institut ions, blockholders, and atomistic outside shareholders is of marginall y greater significance in low-growth than in high-growth firms. The ov erall interpretation of the results is that debt policy and equity own ership structure 'matter' and that the way in which they matter differ s between firms with many and firms with few positive net present valu e projects.