Which of the following two statements is correct? S1: Holding all else constant, firms with higher legal and regulatory exposures also have higher business risk and therefore should have less debt in their capital structures.

S2: Holding all else constant, firms with increased variability of input (production) costs have more business risk and should have more (financial) leverage in their capital structures.

Group of answer choices

S1 is correct but S2 is false

S2 is correct but S1 is false

Both statements are correct

Both statements are false