This paper examines the role of firm-specific and country-specific factors in determining corporate leverage across 42 countries. The authors find that firm-specific determinants of leverage, such as asset tangibility, firm size, risk, profitability, and growth opportunities, vary significantly across countries. They also show that country-specific factors, including legal enforcement, shareholder/creditor rights protection, market/bank-based financial systems, and GDP growth rate, have both direct and indirect impacts on corporate leverage. Directly, these factors influence leverage, such as through bond market development and creditor protection. Indirectly, they affect the role of firm-specific factors, such as asset tangibility and profitability, in shaping corporate leverage. The study concludes that the conventional theories of capital structure, which were developed using U.S. firms as a model, are generally applicable in similar economies with well-developed legal environments and high levels of economic development. However, the findings also highlight the importance of country-specific factors in explaining cross-country differences in corporate leverage.This paper examines the role of firm-specific and country-specific factors in determining corporate leverage across 42 countries. The authors find that firm-specific determinants of leverage, such as asset tangibility, firm size, risk, profitability, and growth opportunities, vary significantly across countries. They also show that country-specific factors, including legal enforcement, shareholder/creditor rights protection, market/bank-based financial systems, and GDP growth rate, have both direct and indirect impacts on corporate leverage. Directly, these factors influence leverage, such as through bond market development and creditor protection. Indirectly, they affect the role of firm-specific factors, such as asset tangibility and profitability, in shaping corporate leverage. The study concludes that the conventional theories of capital structure, which were developed using U.S. firms as a model, are generally applicable in similar economies with well-developed legal environments and high levels of economic development. However, the findings also highlight the importance of country-specific factors in explaining cross-country differences in corporate leverage.