The Capital Structure Puzzle and the Corporate Trade-off Hypothesis PDF Download
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Author: Andreas G. Merikas
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 312
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Book Description
Author: Andreas G. Merikas
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 312
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Book Description
Author: Andreas George Merikas
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 156
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Book Description
Author: Stewart C. Myers
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 46
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Book Description
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: Hengjie Ai
Publisher:
ISBN:
Category :
Languages : en
Pages : 65
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Book Description
This paper provides a survey of the trade-off theory of corporate capital structure. First we provide an analysis of an equilibrium version of the theory. The firm raises debt from an investor. Debt provides interest tax shields but raises the probability of costly bankruptcy. The model provides closed form solutions for the quantity and price of debt. Second, we review dynamic trade-off theory based models. Third, we review the empirical evidence using the equilibrium model as the foundation. The literature has essentially resolved challenges to the theory based on the low leverage puzzle, profits-leverage puzzle, and speed of target adjustment. There is empirical support for predicted interest rate effects, and an impact of market conditions. There is evidence of tax effects in specific contexts, but the predicted tightly structured overall link between taxes and leverage remains challenging to identify. Overall, the theory provides a reasonable basis on which to build our understanding of capital structure. However, we identify several areas where significant theoretical and empirical work remains needed to improve our understanding.
Author: Benjamin M. Friedman
Publisher: University of Chicago Press
ISBN: 0226264238
Category : Business & Economics
Languages : en
Pages : 404
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Book Description
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.
Author: Bjørn Espen Eckbo
Publisher: Elsevier
ISBN: 0080488919
Category : Business & Economics
Languages : en
Pages : 559
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Book Description
Judging by the sheer number of papers reviewed in this Handbook, the empirical analysis of firms’ financing and investment decisions—empirical corporate finance—has become a dominant field in financial economics. The growing interest in everything “corporate is fueled by a healthy combination of fundamental theoretical developments and recent widespread access to large transactional data bases. A less scientific—but nevertheless important—source of inspiration is a growing awareness of the important social implications of corporate behavior and governance. This Handbook takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues, ranging from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior. The surveys are written by leading empirical researchers that remain active in their respective areas of interest. With few exceptions, the writing style makes the chapters accessible to industry practitioners. For doctoral students and seasoned academics, the surveys offer dense roadmaps into the empirical research landscape and provide suggestions for future work. *The Handbooks in Finance series offers a broad group of outstanding volumes in various areas of finance *Each individual volume in the series should present an accurate self-contained survey of a sub-field of finance *The series is international in scope with contributions from field leaders the world over
Author: Arvin Ghosh
Publisher: Routledge
ISBN: 135153016X
Category : Business & Economics
Languages : en
Pages : 143
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Book Description
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: Sanjiva Prasad
Publisher:
ISBN: 9781902518923
Category : Corporate governance
Languages : en
Pages : 0
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Book Description
Author: Lakshmi Shyam-Sunder
Publisher: Forgotten Books
ISBN: 9780666206985
Category : Business & Economics
Languages : en
Pages : 40
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Book Description
Excerpt from Testing Static Trade-Off Pecking Order Models of Capital Structure The theory of capital structure has been dominated by the search for optimal capital structure. Optimums normally require a trade-off, in this case between the tax advantages of borrowed money and the costs of financial distress when the firm finds it has borrowed too much. A value-maximizing firm would equate this benefit and cost at the margin, and operate at the top of the curve in Figure 1. The curve would top out at relatively high debt ratios for safe, profitable firms with plenty of taxes to shield and assets whose values would escape serious damage in financial distress. This static trade-017 theory quickly translates to empirical hypotheses. For example, it predicts reversion of the actual debt ratio towards a target or Optimum, and it predicts a cross-sectional relationship between average debt ratios and asset risk, profitability, tax status and asset type. Several pounds of empirical literature have been guided by such hypotheses. Most of these studies have supported the static trade-off theory. That is, they have rejected the null, and shown some statistically significant coefficients consistent with the theory. However, none of these papers has systematically compared the explanatory power of their fitted equations with alternative explanations of financing behavior, and none has checked whether their equations could seem to work even when actual financing is driven by other forces. That is, they have not checked the power of their tests against alternative hypotheses. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Author: Christopher Parsons
Publisher: Now Publishers Inc
ISBN: 160198202X
Category : Business & Economics
Languages : en
Pages : 107
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Book Description
Empirical Capital Structure reviews the empirical capital structure literature from both the cross-sectional determinants of capital structure as well as time-series changes.
