International financial management, essentially an extension of corporate finance to a global context has undergone an extraordinary metamorphosis since the mid-1960's. From a relatively stable and predictable economic environment at that time, the forces of inflation, technological innovation, and deregulation led to new and volatile markets and a plethora of financial instruments. Many of these developments would not have been possible without the academic research in this subject which went from mainly descriptive and anecdotal to analytical. Arguably the most important theoretical developments in finance took place since then: the capital asset pricing model [CAPM], option pricing models, and the recognition of agency costs as a potential conflict of interest between management and shareholders of a firm. These are still areas of disagreement: the cost of capital for a company with global markets and investors needs more study; managing currency, interest rate, and other risks in a complex international organization is still a work in progress. On balance, the case can be made that the changes seen over more than three decades have been positive.

Dr. Stonehill is Professor, Oregon State University and Courtesy Visiting Professor, North European Management Institute (NEMI), Oslo, Norway. Dr. Beekhuisen is Visiting Professor, INSEAD, and formerly Professor, The Netherlands School of Business, Breukelen. Dr. Wright is Associate Professor at McGill University and Visiting Professor, Institute for International Studies and Training, Japan. Dr. Remmers is Professor, INSEAD. Dr. Toy is Assistant Professor, Columbia University and Visiting Professor, NEMI. Dr. Pares is Assistant Professor, INSEAD-CEDEP. Dr. Egan is Professor of Marketing, Georgia State University. Dr. Bates is Professor and Director of the Center for World Business, California State University at San Francisco.

Dr. Remmers is Professor at INSEAD (Fontainebleau, France) and is responsible for the French analysis in the article. Dr. Stonehill is Professor of Finance at Oregon State University (Corvallis, Oregon). Some of the data were gathered during 1972-73 while he was a Visiting Courtesy Professor at the North European Management Institute (Oslo, Norway). He is responsible for the Norwegian and American analyses. Dr. Wright is Associate Professor at McGill University (Montreal, Canada). All of the Japanese data were gathered during 1972-73 while he was a Visiting Professor at the Institute for International Studies and Training (Japan) and a guest at Nomura Research Institute (Tokyo, Japan). Dr. Beekhuisen is a Visiting Professor at INSEAD. Some of the Dutch data were gathered during 1972-73 while he was a Professor at the Netherlands School of Business (Breukelen, The Netherlands).

The purpose of this paper is to test the hypothesis that three financial performance variables, namely, growth, profitability, and risk, are determinants of corporate debt ratios in the manufacturing sector in industrialized countries. In particular, a linear model is hypothesized and Ordinary Least Squares is used to estimate the coefficients for the relationship. The sample used contains 816 firms in four selected industries in five industrialized countries during the period 1966–72.