Low leverage: A low road to ruin for law firms?


By Sean Larkan | Oct 14, 2011

By Sean Larkan

A truly worrisome trend is spreading from American law firms throughout the world: institutionalized low leverage. Many partners welcome the higher profits and managerial relief this trend produces. But in the longer term, this short-sighted policy threatens serious damage to firms, clients, and partners themselves.

Lawyers in other countries carefully monitor the U.S. legal market, sometimes regarding it as a trendsetter and even a model. In recent years, however, a U.S.-led trend to- wards lower average levels of leverage could have seri- ous-long term consequences for that market and any others that follow it. This has implications for the legal profession, for firms, for partners, and im- portantly, for clients.

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