Review Of Capital Structure Theories
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A Critical Literature Review Of Capital Structure Theories
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Author : Mr. Douglas Wafula Simiyu
language : en
Publisher:
Release Date : 2020
A Critical Literature Review Of Capital Structure Theories written by Mr. Douglas Wafula Simiyu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
Capital structure is a vital component of any business entity. The success and or failure of many business enterprises arise from their capital structures. Many financial institutions adopt different approaches regarding their capital structure arrangement. Some depend entirely on debt financing, others depend more on equity financing and others still mix the two approaches. The question has been which capital structure is the best for financial institutions? For those firms which prefer mixing the two approaches, what would be the best portion for the two approaches? This paper critically reviews the capital structure theories, which include Franco Modigliani and Merton Miller theorem, Trade-off theory of capital structure and taxes, Pecking order theory, The market timing theory and Agency cost theory. This paper suggests that any financial institution should carefully analyze its operations before making its capital structure decision.
A Comprehensive Review On Capital Structure Theories
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Author : Hamed Ahmadinia
language : en
Publisher:
Release Date : 2018
A Comprehensive Review On Capital Structure Theories written by Hamed Ahmadinia and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
The aim of this article is to provide a comprehensive review on different theories and hypothesis in regard with achieving an optimal capital structure. Many researchers believed that capital structure includes share issuance, private investment, bank debt, business debts, leasing contracts, tax debt, retirement debt, deferred compensation for executives and employees, deposits, product related-debt and other probable debt. These theories and hypothesis include: Net income, Net operational income, Traditional approach theory, Miller and Modigliani theory, Static trade-off theory, Asymmetric of the information hypothesis, Pecking order theory, Signaling theory, Agency cost theory, Free cash flow hypothesis, Dynamic trade-off theory and Market Timing theory. By applying these theories, the analysts will be able to reach a maximum return with minimum risk while they increase the value of corporation. Because of the close relationship between profitability and capital structure, this paper is going to suggest a new model called genetic algorithm model by using support vector regression and profitability factors for obtaining an international range of optimal capital structure.
Review Of Capital Structure Theories
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Author : Konstantinos Seferiadis
language : en
Publisher:
Release Date : 2016
Review Of Capital Structure Theories written by Konstantinos Seferiadis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
The "average" firm in the market of United Kingdom has changed its leverage ratio dramatically in the last three decades, following some patterns which apparently cannot be explained by applying simplistic methods. In this paper we try to shed some light in the main stream of the Capital Structure Theories and its critical determinants that influence the evolution in the period of our study. Using the equity decisions of an initial dataset of 3489 firms in UK, we try to reply in three main issues. First, using descriptive statistics, we try to consider how corporate capital structures have evolved during the last three decades in UK. Then, we investigate if existing empirical models explain the changes in the issuing of debt and equity. And last, if these models cannot explain the changes, we examine the nature of forces that are behind variation in financial policy. In our analysis, with a view to find the determinant forces behind, we examine a wide set of linear regressions, concluding to a model comprising of the most prominent factors that affect capital structure changes. Our regression framework is an improvement that can implement the foundation for much future work.
Theory Of Capital Structure A Review
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Author : Stein Frydenberg
language : en
Publisher:
Release Date : 2011
Theory Of Capital Structure A Review written by Stein Frydenberg and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This paper is a review of the central theoretical literature. The most important arguments for what could determine capital structure is the pecking order theory and the static trade off theory. These two theories are reviewed, but neither of them provides a complete description of the situation and why some firms prefer equity and others debt under different circumstances. The paper is ended by a summary where the option price paradigm is proposed as a comprehensible model that can augment most partial arguments. The capital structure and corporate finance literature is filled with different models, but few, if any give a complete picture.
Capital Structure Theories
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Author : Max Julian Braun
language : en
Publisher:
Release Date : 2014
Capital Structure Theories written by Max Julian Braun and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Empirical Capital Structure
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Author : Christopher Parsons
language : en
Publisher: Now Publishers Inc
Release Date : 2009
Empirical Capital Structure written by Christopher Parsons and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Business & Economics categories.
Empirical Capital Structure reviews the empirical capital structure literature from both the cross-sectional determinants of capital structure as well as time-series changes.
Capital Structure Theory
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Author : Dilrukshi Yapa Abeywardhana
language : en
Publisher:
Release Date : 2017
Capital Structure Theory written by Dilrukshi Yapa Abeywardhana and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Capital structure is still a puzzle among finance scholars. Purpose of this study is to review various capital structure theories that have been proposed in the finance literature to provide clarification for the firms' capital structure decision. Starting from the capital structure irrelevance theory of Modigliani and Miller (1958) this review examine the several theories that have been put forward to explain the capital structure. Three major theories emerged over the years following the assumption of the perfect capital market of capital structure irrelevance model. Trade off theory assumes that firms have one optimal debt ratio and firm trade off the benefit and cost of debt and equity financing. Pecking order theory (Myers, 1984, Myers and Majluf, 1984) assumes that firms follow a financing hierarchy whereby minimize the problem of information asymmetry. But neither of these two theories provide a complete description why some firms prefer debt and others prefer equity finance under different circumstances. Another theory of capital structure has introduced recently by, Baker and Wurgler (2002), market timing theory, which explains the current capital structure as the cumulative outcome of past attempts to time the equity market. Market timing issuing behaviour has been well established empirically by others already, but Baker and Wurgler (2002) show that the influence of market timing on capital structure is regular and continuous. So the predictions of these theories sometimes acted in a contradictory manner and Myers (1984) 32 years old question “How do firms choose their capital structure?” still remains.
Capital Structure In The Modern World
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Author : Anton Miglo
language : en
Publisher: Springer
Release Date : 2016-07-20
Capital Structure In The Modern World written by Anton Miglo and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-07-20 with Business & Economics categories.
This book focuses on microeconomic foundations of capital structure theory. It combines theoretical results with a large number of examples, exercises and applications. The book examines fundamental ideas in capital structure management, some of which are still not very well understood in the business community, such as Modigliani and Miller’s irrelevance result, trade-off theory, pecking-order theory, asset substitution, credit rationing and debt overhang. Chapters also cover capital structure issues that have become very important following the recent financial crisis. Miglo discusses the ways in which financial economists were forced to look critically at capital structure, as the problems faced by many companies stemmed from their financing policies following the crisis. The book also discusses links between capital structure and firm’s performance, corporate governance, firm’s strategy and flexibility, and covers such topics as life cycle approach to capital structure management, capital structure of small and start-up companies, corporate financing versus project financing and examples of optimal capital structure analyses for different companies. This comprehensive guide to capital structure theory will be of interest to all students, academics and practitioners seeking to understand this fast-developing and critical area of business management.
Empirical Analysis Of The Capital Structure Determinants
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Author : Abubakr Saeed
language : en
Publisher: LAP Lambert Academic Publishing
Release Date : 2009-08
Empirical Analysis Of The Capital Structure Determinants written by Abubakr Saeed and has been published by LAP Lambert Academic Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-08 with categories.
Capital structure theory is one of the most bewildering issues in the corporate finance literature. Capital structure theories suggest various factors that affect firm to maintain a target capital structure in order to maximize firm value, by minimizing the costs of prevailing market imperfections. Subsequent to the departures from Modigliani and Miller (1958) s irrelevance proposition, there is a long tradition in corporate finance to investigate the capital structure determinants of firms. Most capital structure studies based on these theories to date uses data from economies that have developed financial markets or approaching higher stages of transition, i.e. China and India. Less developed market and particular specific industry is rare in literacy sphere. This book analyzes the explanatory power of some predominant theories that have been proposed in the literature to explain determinants of capital structures across firms. In particular, this study investigates the capital structure determinants of Pakistani firms based on a panel data set from 2001 to 2005.
Capital Structure And Firm Performance
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Author : Arvin Ghosh
language : en
Publisher: Routledge
Release Date : 2017-07-05
Capital Structure And Firm Performance written by Arvin Ghosh and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-07-05 with Business & Economics categories.
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.