In the United States, government rescues are not as common as in other countries. Assuming that this is expected to continue in the future, the risk premium on a given level of debt would be higher for U.S. firms than for firms of other countries, everything else being equal.

Question

Quizplus · Accepted Answer

If government rescues are less common, investors may perceive a higher level of risk associated with investing in firms that rely heavily on debt. This could result in a higher risk premium on the debt of U.S. firms compared to firms in countries where government rescues are more common.

In the United States, Government Rescues Are Not as Common