【正文】 er than longterm debt. This suggests that shortterm debt ratios might actually be positively related to growth rates if growing firms substitute shortterm financing for longterm financing. Jensen and Meckling, Smith and Warner, and Green argued that the agency costs will be reduced if firms issue convertible debt. This suggests that convertible debt ratios may be positively related to growth opportunities. It should also be noted that growth opportunities are capital assets that add value to a firm but cannot be collateralized and do not generate current taxable ine. For this reason, the arguments put forth in the previous subsections also suggest a negative relation between debt and growth opportunities. Indicators of growth include capital expenditures over total assets (CE/TA) and the growth of total assets measured by the percentage change in total assets (GTA). Since firms generally engage in research and development to generate future investments, research and development over sales (RD/S) also serves as an indicator of the growth attribute. D. Uniqueness Titman presents a model in which a firm39。s total work force that voluntarily left their jobs in the sample years. It is postulated that RD/S measures uniqueness because firms that sell products with close substitutes ar39。s value as that value decreases. It is also the case that relatively large firms tend to be more diversified and less prone to bankruptcy. These arguments suggest that large firms should be more highly leveraged. The cost of issuing debt and equity securities is also related to firm size. In particular, small firms pay much more than large firms to issue new equity (see Smith) and also somewhat more to issue longterm debt. This suggests that small firms may be more leveraged than large firms and may prefer to borrow short term (through bank loans) rather than issue longterm debt because of the lower fixed costs associated with this alternative. We use the natural logarithm of sales (LnS) and quit rates (QR) as indicators of size. The logarithmic transformation of sales reflects our view that a size effect, if it exists, affects mainly the very small firms. The inclusion of quit rates, as an indicator of size, reflects the phenomenon that large firms, which often offer wider career opportunities to their employees, have lower quit rates. G. Volatility Many authors have also suggested that a firm39。s debt level. It is the standard deviation of the percentage change in operating ine (SIGOI). Since it is the only indicator of volatility, we must assume that it measures this attribute without error. H. Profitability Myers cites evidence from Donaldson and Brealey and Myers that suggests that firms prefer raising capital, first from retained earnings, second from debt, and third from issuing new equity. He suggests that this behavior may be due to the costs of issuing new equity. These can be the costs discussed in Myers and Majluf that arise because of asymmetric information, or they can be transaction costs. In either case, the past profitability of a firm, and hence the amount of earnings available to be retained, should be an important determinant of its current capital structure. We use the ratios of operating ine over sales (OI/S) and operating ine over total assets (OI/TA) as indicators of profitability. II. Measures of Capital Structure Six measures of financial leverage are used in this study. They are longterm, shortterm, and convertible debt divided by market and by book values of Alt