Firms A and B are two identical companies operating in the same business sector. There are only two differences between the two firms. The first difference is that the earnings of Firm A are taxed at...

Firms A and B are two identical companies operating in the same business sector. There are only two differences between the two firms. The first difference is that the earnings of Firm A are taxed at a higher rate than those of Firm B, because the two firms are headquartered in different countries. The second difference is that Firm B follows more aggressive strategies than Firm A does, and therefore has a higher probability of default compared to firm A.  Assuming that those are the only differences between the two firms, discuss which of the two firms is expected to have a higher leverage ratio based on the two aforementioned differences, relating you discussion to the trade-off theory of capital structure.