Capital Structure Puzzle

Capital Structure Puzzle
Author: Stewart C. Myers
Publisher:
Total Pages: 46
Release: 1984
Genre: Corporations
ISBN:

This paper contrasts the "static tradeoff" and "pecking order" theories of capital structure choice by corporations. In the static tradeoff theory, optimal capital structure is reached when the tax advantage to borrowing is balanced, at the margin, by costs of financial distress. In the pecking order theory, firms preferinternal to external funds, and debt to equity if external funds are needed. Thus the debt ratio reflects the cumulative requirement for external financing. Pecking order behavior follows from simple asymmetric information models. The paper closes with a review of empirical evidence relevant to the two theories.

Capital Structure and Corporate Financing Decisions

Capital Structure and Corporate Financing Decisions
Author: H. Kent Baker
Publisher: John Wiley & Sons
Total Pages: 504
Release: 2011-03-31
Genre: Business & Economics
ISBN: 1118022947

A comprehensive guide to making better capital structure and corporate financing decisions in today's dynamic business environment Given the dramatic changes that have recently occurred in the economy, the topic of capital structure and corporate financing decisions is critically important. The fact is that firms need to constantly revisit their portfolio of debt, equity, and hybrid securities to finance assets, operations, and future growth. Capital Structure and Corporate Financing Decisions provides an in-depth examination of critical capital structure topics, including discussions of basic capital structure components, key theories and practices, and practical application in an increasingly complex corporate world. Throughout, the book emphasizes how a sound capital structure simultaneously minimizes the firm's cost of capital and maximizes the value to shareholders. Offers a strategic focus that allows you to understand how financing decisions relates to a firm's overall corporate policy Consists of contributed chapters from both academics and experienced professionals, offering a variety of perspectives and a rich interplay of ideas Contains information from survey research describing actual financial practices of firms This valuable resource takes a practical approach to capital structure by discussing why various theories make sense and how firms use them to solve problems and create wealth. In the wake of the recent financial crisis, the insights found here are essential to excelling in today's volatile business environment.

The Capital Structure Puzzle Revisted

The Capital Structure Puzzle Revisted
Author: James L. Berens
Publisher:
Total Pages:
Release: 2000
Genre:
ISBN:

Corporate finance researchers have long been puzzled by low corporate debt rations, given debt's corporate tax advantage. This paper recognizes that firm value typically reflects a growing stream of earnings, while current debt reflects a non-growing stream of interest payments. Debt-to-value is therefore a distorted measure of corporate tax shielding. Even with very small debt-related costs, this may explain the observed magnitude and cross-sectional variation of debt ratios. Since this variation may be independent of tax shielding, debt ratios provide an inappropriate framework for empirically examining the tradeoff theory of capital structure.

The Capital Structure Puzzle

The Capital Structure Puzzle
Author: Mohamed Lahiani
Publisher:
Total Pages: 190
Release: 2003
Genre: Capital
ISBN:

Corporate finance researchers have long been puzzled by low corporate debt ratios given debt's corporate tax advantage. What makes the capital structure debate especially intriguing is that the different theories represent such different, and in some ways almost diametrically opposed, decision-making processes.

Corporate Capital Structures in the United States

Corporate Capital Structures in the United States
Author: Benjamin M. Friedman
Publisher: University of Chicago Press
Total Pages: 404
Release: 2009-05-15
Genre: Business & Economics
ISBN: 0226264238

The research reported in this volume represents the second stage of a wide-ranging National Bureau of Economic Research effort to investigate "The Changing Role of Debt and Equity in Financing U.S. Capital Formation." The first group of studies sponsored under this project, which have been published individually and summarized in a 1982 volume bearing the same title (Friedman 1982), addressed several key issues relevant to corporate sector behavior along with such other aspects of the evolving financial underpinnings of U.S. capital formation as household saving incentives, international capital flows, and government debt management. In the project's second series of studies, presented at the National Bureau of Economic Research conference in January 1983 and published here for the first time along with commentaries from that conference, the central focus is the financial side of capital formation undertaken by the U.S. corporate business sector. At the same time, because corporations' securities must be held, a parallel focus is on the behavior of the markets that price these claims.

Untangling the Capital-Structure Puzzle

Untangling the Capital-Structure Puzzle
Author: Hak Choi
Publisher:
Total Pages: 8
Release: 2015
Genre:
ISBN:

This paper clarifies the capital structure puzzle. The traditional theories have forgotten to monitor the money raised from equity issuing. When included, the contribution of this source of finance becomes apparent. Though its productivity is the same as any money, including debt, its cost is much lower. The optimal debt/equity ratio is thus found to be the reciprocal of their prices.

Empirical Capital Structure

Empirical Capital Structure
Author: Christopher Parsons
Publisher: Now Publishers Inc
Total Pages: 107
Release: 2009
Genre: Business & Economics
ISBN: 160198202X

Empirical Capital Structure reviews the empirical capital structure literature from both the cross-sectional determinants of capital structure as well as time-series changes.