Author: William E. Fruhan (Jr)
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: William E. Fruhan
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Author: Eui Yong Lee
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 151

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Author: Oliver Hart
Publisher:
ISBN:
Category :
Languages : en
Pages : 35

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In the thirty or so years since the Modigliani-Miller theorem, scholars have worked to relax the theorem's assumptions in order to obtain a better understanding of the capital structure of firms. This work has produced some important insights but has not yet delivered a fully coherent theory of optimal capital structure. For example, at present we do not understand very well the distinguishing features of debt and equity or why these claims, as opposed to the many instruments that could be chosen, are most frequently issued by firms. Given this state of affairs, existing explanations of the debt-equity ratio must be seem as still preliminary, as must efforts to use these explanations to understand global trends such as the large increases in leverage in the United States and United Kingdom during the 1980s.In the first part of this paper, I will argue that one reason progress on understanding capital structure has been limited is that relatively few analysts have adopted an explicit agency-theoretic or managerial discretion perspective. In particular, although the literature, starting with the work of Michael Jensen and William Meckling, frequently refers to conflicts of interest, most of it does not emphasize the conflict of interest between a firm's management and its security holders. But I argue that this particular conflict of interest - that is, the idea that management is self-interested - is critical. In the absence of this conflict, optimal capital structure would look very different from what is observed in the world. In particular, firms would not issue senior or secured debt, whereas in fact a considerable amount of corporate debt has at least one of these features. That is, standard departures from the Modigliani-Miller framework that focus on the role of taxes, asymmetric information, or incomplete markets but ignore managerial self-interest are not sufficient to explain observed capital structure.In the second part of the analysis I will discuss what has been learned from the relatively few studies that have explicitly adopted an agency-theoretic perspective. This body of work, although itself quite preliminary, can explain the use of senior or secured debt or both, as well as shed light on some observe patterns of capital structure, including a number of findings from studies that measure the response of security prices to important events that affect optimal capital structure (quot;event studiesquot;).

Author: Murray. Michael J.
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 82

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Author: E. Han Kim
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 23

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Author: Ŭng-han Kim
Publisher:
ISBN:
Category : Bankruptcy
Languages : en
Pages : 58

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Author: Arvin Ghosh
Publisher: Routledge
ISBN: 1351530178
Category : Business & Economics
Languages : en
Pages : 140

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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
ISBN: 3838255399
Category : Business & Economics
Languages : en
Pages : 138

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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: Lemi Leba
Publisher:
ISBN:
Category :
Languages : en
Pages :

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