What trend has been observed regarding firms' issuance of debt and equity since 1965?

The trend observed in the issuance of debt and equity since 1965 indicates that firms have issued more debt than equity based on book values. This trend can be attributed to several factors, including the cost of capital considerations and tax advantages associated with debt financing.

Historically, companies have found debt to be a cheaper source of capital compared to equity due to lower interest rates and the tax deductibility of interest expenses. This makes debt a more attractive option for financing projects and expansion. Additionally, firms may choose to avoid equity issuance to prevent dilution of ownership among existing shareholders.

This shift towards favoring debt over equity can also be linked to broader economic conditions, regulatory changes, and market dynamics that influence a company’s capital structure decisions. The increasing reliance on debt allows firms greater leverage, potentially leading to higher returns on equity, which can incentivize managers to pursue this financing option.

The other options suggest alternative trends or circumstances that do not align with the evidence observed in the financial markets over the decades. For example, the claim that firms have only issued preferred stock does not hold true, as common equity and various forms of debt securities have remained prevalent. Similarly, the notion that the issuance of securities has remained stable overlooks the significant fluctuations in capital markets and the