The food supplies and therefore the diets of economically developing countries are now generally in rapid transition. This nutritional transition is accompanied by equally rapid changes in levels of physical activity and body composition. This nutritional transition can be seen as part of a more general demographic/nutritional/ epidemiological transition. The demographic transition, from generally rural societies with low life expectancy at birth and families with many children to generally urban societies with higher life expectancy at birth and fewer children, has been well documented. The epidemiological transition that follows the demographic transition is also fairly well understood: in general, the dominant diseases shift from endemic deficiency and infectious diseases, mostly of earlier life, to epidemic chronic diseases, generally of later life (Omran 1971).
There is now enough evidence to propose a general theory of causally as well as chronologically linked demographic/nutritional/epidemiological transition. Put simply, the theory proposes that when populations face massive social and technological change that includes increasing urbanization as a key component, the pattern of their food supplies and therefore their diets, with associated factors, also changes; and, consequently, disease patterns also change. Historically, this general transition can be traced in countries that are now economically developed, e.g., Britain between the sixteenth and eighteenth centuries as it went through agrarian and industrial revolutions. Now, in Latin America, Africa, and the Asian countries studied in this review, the linked transitions are taking place much faster, and in some cases extremely rapidly.
The Atkins New Diet Revolution (1), a low-carbohydrate, high-protein (LCHP) diet, has been the center of debate among health care professionals in recent years. Proponents of the diet claim that it stimulates weight loss and reduces chronic disease risk. Conversely, critics suggest that the disproportionate amount of fat negatively impacts blood lipids (cholesterol and triacylglycerols) and increases risk for cardiovascular disease. Further, the excess protein may stimulate bone loss and increase the risk for osteoporosis (2), a debilitating disease defined by reduced bone mass and breakdown of the microarchitecture of the bone (3).
We examine the financing and debt maturity choices made by undiversified large shareholders or owner-managers. The interplay between the objective of the undiversified, self-interested owner-manager who controls the firm and the valuation of the firm’s marketed claims by well-diversified outside investors, has a major impact on leverage and debt maturity choices as well as credit spreads. The effect of this interplay is particularly significant in a world where the representative investor (who determines asset prices in the economy) is risk-averse leading to nonzero market prices of systematic risk and risk premia of the firm’s investment opportunities. In a perfect information framework with no taxes or bankruptcy costs, we show that, the owner-manager could, depending on the projects’ characteristics, finance them exclusively with debt, exclusively with equity, or with a combination of equity and debt. Ceteris paribus, leverage increases with the expected growth rate of firmvalue under its investment opportunities, and decreases with its volatility. Debt maturity varies non-monotonically in a U-shaped manner with the expected growth rate, and decreases with the volatility.
Our results reconcile empirical evidence on the variation of financing choices with firm characteristics that is not completely consistent with previous theories. The significant impact of the expected returns (therefore, risk premia) of firms’ investment opportunities on their leverage ratios, debt maturities, and credit spreads are important implications of our theory that cannot be obtained in these models or in models in which all agents are risk-neutral so that risk premia are zero. We empirically test the implications of our theory for the relationships among firms’ financing and debt maturity choices and the expected growth rate and volatility of their asset values. Controlling for all the significant determinants of firms’ financing and debt maturity choices identified by earlier studies, we show significant empirical support for our predictions.
