在自由化之前，许多银行被迫使用配额信贷。对贷款和利率有控制。这必然意味着银行不会使用价格来将贷款供应和需求因素联系起来。由于这一点，对债务的需求增加了。这通常意味着有更多的借款人只是被延长了。由于放松管制，有必要减少信贷。在放松管制的同时，经济活动中出现了周期性回升。他们被发现分享利润。基本面的改善被认为是真实资产价格的合理增长(Booth et al.， 2001)。这些都被发现是投机性的增长，而不是由基本面决定的。在公司内部，资产价格的增加被发现为提高杠杆率提供了一种动力，这是由于名义利息的税收可抵扣性。这些名义利息支付被发现在这两个部分之间是分开的。如果借贷利率被发现增加更多的通货膨胀，可以增加税收减免，通货膨胀可以创造。这些可以被更高的借贷成本完全抵消。
Before liberalization, many of the banks were forced to utilize the ration credit. There were controls on the lending and interest rates. This invariably meant banks will not use prices to associate the loan supply along with the demand factors. Owing to this there is increased demand for the debt. This is often meant to mean that there are higher numbers of borrowers that are simply lengthened. Owing to the deregulation there is a need to ration credit disappeared. In the same time in the deregulation there was a cyclical pick-up within economic activity. These were found to share towards the profits. The improvement in the fundamentals is found to be legitimate increase in the real asset prices (Booth et al., 2001). These are found to set of speculative increases and not justified by the fundamentals. Within the firm the increase in the asset prices are found to provide an incentive towards the higher leverages owing to the tax deductibility of the nominal interest. These nominal interest payments are found to be separated between the two components.
If the borrowing rates are found to increase more with the inflation there can be increased tax deduction that the inflation can create. These can be completely offset by the higher borrowing costs. There is also the aggregate measure of the real cost of debt with the aggregate measure. In the cases of equilibrium, the cost of debt is found to put risk on the premium. They must be equal to the cost of equity. However, the equilibrium conditions are not continuous. In the cases where the borrowing rates are found to increase with the inflation there will be increased tax deduction. These are found to be completely offset by the higher borrowing costs. When the costs of the debt are found to be rising, it is found that they are relative to the cost of the equity. These are expected to be increased with the gearing. These are some of the firm level and the macro environmental analysis that needs to be considered with the case of capital structure of the firm.