Edge International

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

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 serious-long term consequences for that market and any others that follow it. This has implications for the legal profession, for firms, for partners, and importantly, for clients.