The Capital Structure Puzzle Revisted
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| 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.
| Author | : H. Kent Baker |
| Publisher | : John Wiley & Sons |
| Total Pages | : 516 |
| Release | : 2011-05-03 |
| Genre | : Business & Economics |
| ISBN | : 0470569522 |
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.
| Author | : Aart Groenendijk |
| Publisher | : |
| Total Pages | : 15 |
| Release | : 1995 |
| Genre | : |
| ISBN | : 9789050861762 |
| 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.
| 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.
| Author | : Harold Bierman Jr. |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 230 |
| Release | : 2012-12-06 |
| Genre | : Business & Economics |
| ISBN | : 1461510376 |
In 1958 an academic paper on corporate finance written by two professors (Merton Miller and Frances Modigliani, who were later awarded the Nobel prize for their research efforts) was published in The American Economic Review. One prime conclusion of their paper was that the exact form of a firm's capital structure did not affect the firm's value. Later papers by the same two authors and by many others modified the assumptions and changed this conclusion. We now think that capital structure decisions do affect a firm's value and corporate managers should understand better the financing alternatives that are available. One of the most important financial decisions is the decision to buy or lease assets. The leasing industry is large and getting larger. Unfortunately, it is very easy for a firm to evaluate incorrectly lease alternatives (see Chapter 12). The capital structure decision is one of the three most important financial decisions that management make (the distribution of earnings and the capital budgeting decisions are the other two contenders). Managers should increase their understanding of capital structure alternatives and remember that choosing the best capital structure is an art and not an exact simple calculation. But applying the art can be improved with understanding.
| Author | : Arvin Ghosh |
| Publisher | : Routledge |
| Total Pages | : 140 |
| Release | : 2017-07-05 |
| Genre | : Business & Economics |
| ISBN | : 1351530178 |
Capital structure theory is one of the most dynamic areas of finance and forms the basis for modern thinking on the capital structure of firms. Much controversy has resulted from comparisons of the theory of capital structure originally developed by Franco Modigliani and Merton Miller to real-world situations. Two competing theories have emerged over the years, the optimal capital structure theory and the pecking order theory.Arvin Ghosh begins with an overview of the controversies regarding capital structure theories, and then statistically tests both the optimal capital structure and pecking order theories. Using the binomial approach he analyzes the determinants of capital structure while discussing the role of market power in determining capital structure decisions. Ghosh probes the questions of new stock offerings and stockholders' returns, and analyzes capital structure and executive compensation. He then looks into debt financing ownership structure, and the controversal relationship between capital structure and firm profitability. Finally, he discusses the latest developments in the field of capital structure.A concise overview of a major issue in business economics and finance, this volume provides a fuller understanding of capital structure influence on the financial performance of firms, and will certainly stimulate further debate. While hundreds of scholarly articles have been written on the subject this is the first book to test competing theories against measurements of firms' performance and their underlying capital structure.
| Author | : Benjamin Friedrich |
| Publisher | : ibidem-Verlag / ibidem Press |
| Total Pages | : 138 |
| Release | : 2012-02-03 |
| Genre | : Business & Economics |
| ISBN | : 3838255399 |
The theory of capital structure is one of the most exciting and complex topics in corporate finance. After many years of debate it is still extremely difficult to provide a conclusive answer to the question which capital structure maximises the value of a company and what factors determine the optimal mix of debt and equity capital.This book provides a comprehensive introduction to capital structure theory and investigates its practical relevance in the German market. The main objectives are to explore the link between capital structure theory and corporate practice and to test determinants of capital structure choice empirically.The book has been written for students, researchers, and academics, but also for practitioners seeking empirical evidence of capital structure theory and an empirical model that can be used to estimate the optimal level of debt for an individual company in relation to an existing industry optimum.
| Author | : Angel F. Khomar |
| Publisher | : |
| Total Pages | : 7 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
Debt and equity represent somewhat different sources of funds for a company, and the Chief Financial Officer (CFO) would like to know the best combination of debt and equity funding to use. That is, what should be the company's capital structure. Should the apparent differences between debt and equity make any difference? Which combination of debt and equity might have the lowest cost? What influence do taxes and the costs of raising new debt and equity capital have on the capital structure decision? How can one quantify the effects of bankruptcy risk? Put another way, what combination of debt and equity financing would help to maximize the market value of the firm? These issues represent the capital structure puzzle and have vexed finance thinkers for decades. Fortunately, evolving theory is beginning to show how a company can find its optimum capital structure.
| Author | : Andreas G. Merikas |
| Publisher | : |
| Total Pages | : 312 |
| Release | : 1988 |
| Genre | : Capital |
| ISBN | : |
