*2.10. Risk*

Trade-off theory states that risky businesses should not be highly levered, according to this theory, there is a negative relationship between risk and debt. From pecking order theory perspective there is also a negative association between operating risk and debt. A company with high volatility in earnings is more likely to face a debt burden and to go bankrupt. Psillaki and Daskalakis (2009) obtained a negative relationship.
