Does Japanese leverage exceed U.S. leverage? When capitalization ratios are based on the book value of equity, Japanese firms do appear to be more highly levered than their U.S. counterparts. The average annual mean capitalization rate of the American firms over the five-year period 1977 to 1981 was 0.469; the corresponding figure for the sample of Japanese firms was 0.294. Statistical tests support the notion that Japanese firms are highly levered in comparison with similar American companies.

When capitalization ratios are based on market value of equity, however, the difference between Japanese and American firms all but disappears. Mean capitalization ratios of U.S. and Japanese firms were comparable in each of the five years 1977 to 1981, and the five-year average means were nearly identical—0.453 for the U.S. versus 0.442 for Japan. Statistical tests do indicate, however, that the Japanese sample contains more low-valued capitalization ratios than the comparable U.S. sample.