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Journal articles on the topic 'Theory of capital structure'

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Published: 4 June 2021
Last updated: 11 February 2022

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1

Ardalan, Kavous. "Capital structure theory: Reconsidered." Research in International Business and Finance 39 (January 2017): 696–710. http://dx.doi.org/10.1016/j.ribaf.2015.11.010.

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2

Pontoh, Winston, and Novi Swandari Budiarso. "Firm characteristics and capital structure adjustment." Investment Management and Financial Innovations 15, no. 2 (2018): 129–44. http://dx.doi.org/10.21511/imfi.15(2).2018.12.

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The adjustment for the firm capital structure is unclear from perspectives of trade-off theory, pecking order theory, life cycle theory, market timing theory, and free cash flow theory, since many research findings contradict each other. Adjustments for the capital structure are complex, since the conditions for each firm are different. The objective of this study is to provide empirical evidence of how firms adjust capital structure in relationship with maturity in context of trade-off, pecking order, free cash flow, and market timing theory. In terms of hypotheses testing, this study conducts logistic regression analysis with 138 Indonesian public firms as the sample in the observed period from 2010 to 2015. To distinguish the results, this study controls the sample by size and age based on the median. The study reports that preferences for the source of funds based on the cost of capital, internal conflict, and firm maturity indicate adjustments for the firm capital structure. Based on Indonesian firms, the form of capital structure in developing countries can refer to a single model or a combination of the trade-off model and pecking order model, as well as market timing.
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3

Abeywardhana, D. K. Y. "Capital Structure Theory: An Overview." Accounting and Finance Research 6, no. 1 (2017): 133. http://dx.doi.org/10.5430/afr.v6n1p133.

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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.
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HARRIS, MILTON, and ARTUR RAVIV. "The Theory of Capital Structure." Journal of Finance 46, no. 1 (1991): 297–355. http://dx.doi.org/10.1111/j.1540-6261.1991.tb03753.x.

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5

Lane, Philip R., and Gian-Maria Milesi-Ferretti. "External Capital Structure: Theory and Evidence." IMF Working Papers 00, no. 152 (2000): 1. http://dx.doi.org/10.5089/9781451857085.001.

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6

Harris, Milton, and Artur Raviv. "Errata: The Theory of Capital Structure." Journal of Finance 47, no. 4 (1992): 1659. http://dx.doi.org/10.2307/2328964.

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7

Bayless, Mark E., and J. David Diltz. "SECURITIES OFFERINGS AND CAPITAL STRUCTURE THEORY." Journal of Business Finance & Accounting 21, no. 1 (1994): 77–91. http://dx.doi.org/10.1111/j.1468-5957.1994.tb00306.x.

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8

Wong, Kit Pong. "A regret theory of capital structure." Finance Research Letters 12 (February 2015): 48–57. http://dx.doi.org/10.1016/j.frl.2014.12.001.

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9

Umdiana, Nana, and Shifa Tivana. "Determinan Struktur Modal Dalam Perspektif Pecking Order Theory Dan Agency Theory." Akuntabilitas 13, no. 2 (2020): 191–204. http://dx.doi.org/10.15408/akt.v13i2.17337.

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The capital structure seen from the perspective of pecking order theory explains that companies are more likely to prefer internal funding than external companies. Pecking Order Theory explains why highly profitable companies generally have less debt. This study aims to discuss Liquidity, Asset Structure, Business Risk, Growth Opportunity, Managerial Ownership of Capital Structures on Manufacturing Companies of the basic Consumer Good Industry Sector listed on the Indonesia Stock Exchange period 2016- 2019.This type of research is an associative causal research with the type of time series. The sample was selected using the purposive sampling method. Data analyzed amounted to 40. Data was tested using multiple linear regression analysis.The result of this study indicate that Liquidity is significant affect the Capital Structure. Asset Structure, Business Risk, Growth Opportunity, Managerial Ownership did not affect the Capital Structures.
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10

Brounen, Dirk, and Piet M. A. Eichholtz. "Capital Structure Theory: Evidence from European Property Companies' Capital Offerings." Real Estate Economics 29, no. 4 (2001): 615–32. http://dx.doi.org/10.1111/1080-8620.00025.

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11

Ju, Nengjiu, Robert Parrino, Allen M. Poteshman, and Michael S. Weisbach. "Horses and Rabbits? Trade-Off Theory and Optimal Capital Structure." Journal of Financial and Quantitative Analysis 40, no. 2 (2005): 259–81. http://dx.doi.org/10.1017/s0022109000002301.

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AbstractThis paper examines optimal capital structure choice using a dynamic capital structure model that is calibrated to reflect actual firm characteristics. The model uses contingent claim methods to value interest tax shields, allows for reorganization in bankruptcy, and maintains a long-run target debt to total capital ratio by refinancing maturing debt. Using this model, we calculate optimal capital structures in a realistic representation of the traditional trade-off model. In contrast to previous research, the calculated optimal capital structures do not imply that firms tend to use too little leverage in practice. We also estimate the costs borne by a firm whose capital structure deviates from its optimal target debt to total capital ratio. The costs of moderate deviations are relatively small, suggesting that a policy of adjusting leverage infrequently is likely to be reasonable for many firms.
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12

Anselmo Perez Reyes, Jose, Montserrat Reyna Miranda, and Jorge Vera-Martínez. "Capital structure construct: a new approach to behavioral finance." Investment Management and Financial Innovations 16, no. 4 (2019): 86–97. http://dx.doi.org/10.21511/imfi.16(4).2019.08.

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Within the framework of behavioral finance, this research shows that financial behavior can be assessed as a cognitive construct. Using certain variables, a multidimensional “cognitive finance” construct can thus be established. Through a technological – psychometric type design with descriptive data analysis, a factor analysis is presented to determine which latent variables tend to charge significantly in order to assess the validity of the dimensions comprising the construct of capital structure and explore its dimensions in relation to financial theory. A 44-item questionnaire is adapted and applied to a sample of chief financial officers from diverse public and nonpublic companies in Mexico. The analysis reveals the existence of four construct dimensions consistent with corporate financial theory. The model helps to explain how decision-makers react to uncertainty and environmental conditions, directly affecting the valuation of firm’s losses or earnings. As evidenced by the results, application of the Item Response Theory to the field of behavioral finance could open up new avenues to the study of cognitive biases, involved in the financial decision-making process. Thus, this implies that behavioral finance can also be treated as “cognitive finance.”
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13

Kelly, William A., and James A. Miles. "Capital Structure Theory and the Fisher Effect." Financial Review 24, no. 1 (1989): 53–73. http://dx.doi.org/10.1111/j.1540-6288.1989.tb00330.x.

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14

Gapenski, Louis C. "Hospital Capital Structure Decisions: Theory and Practice." Health Services Management Research 6, no. 4 (1993): 237–47. http://dx.doi.org/10.1177/095148489300600403.

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The paper explores capitalisation decisions within the hospital sector. This is done theoretically by examining the appropriateness of capital structure theory of hospitals and also in a real world context of soliciting the views of hospital chief financial officers. The ways in which capital decisions are made is described and the relationship of practice to theoretical models discussed.
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15

HOWE, JOHN S., and JAMES D. SHILLING. "Capital Structure Theory and REIT Security Offerings." Journal of Finance 43, no. 4 (1988): 983–93. http://dx.doi.org/10.1111/j.1540-6261.1988.tb02616.x.

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16

FISCHER, EDWIN O., ROBERT HEINKEL, and JOSEF ZECHNER. "Dynamic Capital Structure Choice: Theory and Tests." Journal of Finance 44, no. 1 (1989): 19–40. http://dx.doi.org/10.1111/j.1540-6261.1989.tb02402.x.

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17

Gordon, David. "Linkages in Capital Structure Theory and Economics." Research in Applied Economics 6, no. 3 (2014): 43. http://dx.doi.org/10.5296/rae.v6i3.5898.

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18

Kjellman, Anders, and Staffan Hansén. "Determinants of capital structure: Theory vs. practice." Scandinavian Journal of Management 11, no. 2 (1995): 91–102. http://dx.doi.org/10.1016/0956-5221(95)00004-f.

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19

Marimuthu, Ferina, and Stephanie Caroline Singh. "Do South African state-owned entities follow the pecking order theory of capital structure?" Public and Municipal Finance 10, no. 1 (2021): 25–33. http://dx.doi.org/10.21511/pmf.10(1).2021.03.

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In corporate finance, the pecking-order theory suggests that companies adhere to a particular financing hierarchy, with internal funding taking preference over external funding, and debt financing taking preference over equity. This paper examines whether South African state-owned entities prioritize their financing sources as predicted by the pecking-order theory. A financing deficit variable comprising various cash flow-based components was used to test the theory. A panel regression model was employed using panel data estimators. Using a cross-section sample of 33 state-owned entities from 1995 to 2018, the study finds no evidence that South African state-owned entities follow a pecking order to finance investment projects. The pecking order theory proposition that costs of adverse selection are dominant for lower levels of leverage provides a reason for the financing deficit coefficient not being close to unity and hence an indication that the SOEs in South Africa do not follow the pecking order behavior in their financing decisions, an indication that South African capital market is still developing.
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20

Cheng, Yuxi (Lance), and Ani L. Katchova. "Testing capital structure theories for agricultural cooperatives." International Food and Agribusiness Management Review 22, no. 1 (2019): 1–14. http://dx.doi.org/10.22434/ifamr2018.0050.

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This study investigates adjustments in capital structures for agricultural cooperatives and differences before and during the agricultural downturn which started in 2013. We estimate a simultaneous equation model to test for cooperatives’ capital structure strategies based on two main theories from the corporate finance literature: the trade-off theory and the pecking order theory. Estimation results reveal that agricultural cooperatives in the U.S. generally adjust to short-term financial targets for equity and debt, supporting the trade-off theory while there is little support for the pecking order theory within the agricultural cooperatives sector.
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21

Ganguli, Santanu K. "Capital structure – does ownership structure matter? Theory and Indian evidence." Studies in Economics and Finance 30, no. 1 (2013): 56–72. http://dx.doi.org/10.1108/10867371311300982.

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22

Kahtani, Noura Al, and Mohamed Al Eraij. "Does capital structure matter? Reflection on capital structure irrelevance theory: Modigliani-Miller theorem (MM 1958)." International Journal of Financial Services Management 9, no. 1 (2018): 39. http://dx.doi.org/10.1504/ijfsm.2018.089918.

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23

Al Kahtani, Noura, and Mohamed Al Eraij. "Does capital structure matter? Reflection on capital structure irrelevance theory: Modigliani-Miller theorem (MM 1958)." International Journal of Financial Services Management 9, no. 1 (2018): 39. http://dx.doi.org/10.1504/ijfsm.2018.10011008.

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24

Javed, Syed Muhammad, Agha Jahanzeb ., and Saif-ur-Rehman . "A Critical Review of Capital Structure Theories." Information Management and Business Review 4, no. 11 (2012): 553–57. http://dx.doi.org/10.22610/imbr.v4i11.1012.

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The purpose of this paper is to scrutinize and appreciate the theories of capital structure starting from theory of Miller and Modigliani (1958) of capital structure, which is also known as irrelevance theory of capital structure and also including theory like pecking order theory, trade off theory, market timing theory and agency cost theory. In addition, authors have tried to explain the theories and their contradiction with each other in detail. This paper will be an addition to understand the theories of capital structure.
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25

Culata, Priska Ralna Eunike, and Tri Gunarsih. "Pecking Order Theory and Trade-Off Theory of Capital Structure: Evidence from Indonesian Stock Exchange." Winners 13, no. 1 (2012): 40. http://dx.doi.org/10.21512/tw.v13i1.666.

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Numerous empirical studies in the finance field have tested many theories for firms’ capital structure. The pecking order theory and the trade-off theory of capital structure is among the most influential theories of firms’ capital structure. The trade-off theory predicts optimal capital structure, while the pecking order theory does not predict an optimal capital structure. According to pecking order theory, the order of financial sources used is the source of internal funds from profits, short-term securities, debt, preferred stock and common stock last. The main objective of this study is to econometrically test whether the listed companies in Indonesian Stock Exchange follow the pecking order theory or the trade-off theory. Samples in this study are public companies listed during 2009-2010. The research questions are tested by running regression models. The empirical result of this study shows that the pecking order theory is not supported, while the trade-off theory is supported. This suggests that the capital structure of listed companies in Indonesian Stock Exchange is financed based on optimal capital structure, not by the order financial resources.
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26

Silva, Marta, Luís Pereira Gomes, and Isabel Cristina Lopes. "Explanatory Factors of the Capital Structure." Emerging Science Journal 4, no. 6 (2020): 519–29. http://dx.doi.org/10.28991/esj-2020-01249.

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This paper presents an empirical study of the capital structure of Portuguese companies where the main objective is to find key explanatory factors for indebtedness decisions. The relations between indebtedness and its determinants are tested in the light of the Trade-Off Theory and the Pecking-Order Theory. The motivation of this work was to contribute to the scientific research on the influential determinants of the capital structure and to deepen the knowledge of the Portuguese market. The quantitative methodology is used, through an econometric model for panel data using accounting information of 55 Portuguese companies between 2014 and 2016. Statistical tests such as the F test, the Lagrange Multiplier Breusch-Pagan test and the Hausman test were used to identify the most appropriate method of estimation, which resulted in a panel data model with random effects for individuals. The findings of this study suggest that indebtedness have a positive relation with tangibility and the size of the company, which supports the Trade-Off Theory. However, the positive relationship with the non-debt tax benefits suggests the importance of taxes, contrary to Trade-Off Theory. The negative relationship with cash flows, coupled with the positive relationships between size and growth opportunities, suggest the use of funding only when internal funds become insufficient, supporting the Pecking-Order Theory. The general results support that both theories partially explain the financing decisions of Portuguese companies. Doi: 10.28991/esj-2020-01249 Full Text: PDF
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27

Brusov, Peter, Tatiana Filatova, Natali Orekhova, Veniamin Kulik, and Irwin Weil. "New Meaningful Effects in Modern Capital Structure Theory." Journal of Reviews on Global Economics 7 (March 12, 2018): 104–22. http://dx.doi.org/10.6000/1929-7092.2018.07.08.

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28

Sanusi, N. A., A. G. Talattov, S. Kusairi, and A. H. S. M. Nor. "Modeling of Zakat in the capital structure theory." Journal of Fundamental and Applied Sciences 9, no. 6S (2018): 900. http://dx.doi.org/10.4314/jfas.v9i6s.67.

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29

Frank, Murray Z., and Vidhan K. Goyal. "Testing the pecking order theory of capital structure." Journal of Financial Economics 67, no. 2 (2003): 217–48. http://dx.doi.org/10.1016/s0304-405x(02)00252-0.

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Bhagat, Sanjai, Brian Bolton, and Ajay Subramanian. "Manager Characteristics and Capital Structure: Theory and Evidence." Journal of Financial and Quantitative Analysis 46, no. 6 (2011): 1581–627. http://dx.doi.org/10.1017/s0022109011000482.

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AbstractWe investigate the effects of manager characteristics on capital structure in a structural model. We implement the manager’s optimal contracts through financial securities that lead to a dynamic capital structure, which reflects the effects of taxes, bankruptcy costs, and manager-shareholder agency conflicts. Long-term debt declines with the manager’s ability, inside equity stake, and the firm’s long-term risk, but increases with its short-term risk. Short-term debt declines with the manager’s ability, increases with her equity ownership, and declines with short-term risk. We show support for these implications in our empirical analysis.
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31

Cantillo, Miguel. "A Theory of Corporate Capital Structure and Investment." Review of Financial Studies 17, no. 4 (2003): 1103–28. http://dx.doi.org/10.1093/rfs/hhg045.

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32

Lam, Swee-Sum, Weina Zhang, and Reginald Reagan Chua Lee. "The Norm Theory of Capital Structure: International Evidence*." International Review of Finance 13, no. 1 (2012): 111–35. http://dx.doi.org/10.1111/j.1468-2443.2012.01154.x.

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33

Gale, Douglas, and Piero Gottardi. "A general equilibrium theory of banks' capital structure." Journal of Economic Theory 186 (March 2020): 104995. http://dx.doi.org/10.1016/j.jet.2020.104995.

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34

Hersugondo, H., Imam Ghozali, Endang Triwidyarti, and Eka Handriani. "Capital Structure and Ownership: Intellectual Capital Disclosure Indicator." Journal of Southwest Jiaotong University 56, no. 3 (2021): 549–66. http://dx.doi.org/10.35741/issn.0258-2724.56.3.46.

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The purpose of this paper is to examine the most significant determinants of the intellectual capital of manufacturing firms in Indonesia. Furthermore, using a regression model, it investigates whether the models proposed can provide the same explanation in Europe as in Indonesia. Multiple regression models were used during this study. Ten variables were tested statistically, using e-views of samples of 176 manufacturing companies listed on the Indonesia Stock Exchange during this study. The results indicate that leverage, audit committee, company size, and the independent board positively influence intellectual capital disclosure. However, leverage has a negative effect on firm size. These findings comply with the pecking order and financial agency theory, which helps understand the application of various studies on value for firms in Indonesia. This research was able to explore the IC determinants of manufacturing firms. However, more detailed evaluations could be conducted.
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35

Hornstein, Doug. "Capital Accumulation and Capital-Labor Relations: A Critique of the Social Structure of Accumulation Theory." Science & Society 85, no. 2 (2021): 236–62. http://dx.doi.org/10.1521/siso.2021.85.2.236.

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The social structure of accumulation (SSA) theory seeks to bridge the gap between highly abstract Marxian categories and concrete history in the analysis of institutional structures of capitalist society. More specifically, the theory focuses on the temporal transformation and national specificity of capital–labor relations. However, SSA theory cannot adequately explain why these relations take specific forms in time and space. In general, the theory fails to reconcile the concrete and the abstract, falling back on unmediated historical explanations. These explanatory limitations derive from an empiricist methodology, which can be examined through the lens of Juan Iñigo Carrera's development of Marxian theory. Iñigo Carrera additionally offers an alternative approach to the historical transformation of capital–labor relations and their national specificities. This explanation derives from Marx's analysis of the transformation of the materiality of the capitalist labor process, and explains concrete phenomena through the further development of abstract categories.
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Wu, Feng, Zhengfei Guan, and Robert Myers. "Farm capital structure choice: theory and an empirical test." Agricultural Finance Review 74, no. 1 (2014): 115–32. http://dx.doi.org/10.1108/afr-08-2012-0041.

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Purpose – The purpose of this paper is to provide a unified theoretical framework that explains farm capital structure choice. Design/methodology/approach – The framework accommodates different credit access scenarios and heterogeneous risk profiles of borrowers. It recognizes that the costs of capital are endogenously determined, reflecting the degree of credit risk and accessibility to credit markets. Based on the proposed model and the comparative statics derived thereof, the paper empirically tests the impacts of different factors on capital structure choice. Findings – Based on the theoretical framework, the paper derived the impacts of different factors on capital structure choice using comparative statics. Results suggest that the potential determinants of capital structure have varying effects at different ranges of leverage. Empirical evidence supports the theoretical model. Originality/value – Despite all of previous work on various aspects of farm capital structure choice, a framework that encompasses each of the different assumptions and scenarios is still lacking. The theoretical model integrates credit risk models and accommodates endogenous cost of capital, providing a comprehensive framework for studying farm capital structure choice and its determinants. The results provide insights that could help policy makers and lenders develop effective instruments to manage, monitor, and influence the financial leverage of farms at different quantiles of debt ratio.
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37

Wu, Zhongwei. "Risk, Preference, Capital Structure and Incentives." International Business Research 11, no. 7 (2018): 20. http://dx.doi.org/10.5539/ibr.v11n7p20.

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Using the surplus theory of the firm, we examine capital and labor as inputs of a surplus generating firm, and study the capital structure of the firm. We derive two equilibrium models on: (a) the capital structure and ownership of the firm and (b) alternative incentive compensation structures. Within the framework of the firm as a cooperative surplus generating enterprise, we introduce the concepts of risk, preference and resource constraints, to provide a framework for analyzing more sophisticated methods of dividing the risks and rewards of the firm’s surplus.
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Sahudin, Zahariah, Zuraidah Ismail, Saliza Sulaiman, Hamisah Abdul Rahman, and Mohd Nizam Jaafar. "Capital Structure Determinants of Shariah-compliant Firms." Journal of Emerging Economies and Islamic Research 7, no. 1 (2019): 65. http://dx.doi.org/10.24191/jeeir.v7i1.7256.

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This is a preliminary study developed to explore the determinants of capital structure of Shariah-compliant firms listed in Bursa Malaysia. This study is primarily motivated by the issue of the determinants still being inconclusive in the area of capital structure. The study is performed using the static models namely Pool Ordinary Least Square, Fixed Effect and Random Effect Model. Empirical analysis on the determinants reveals that country specific factor which is GDP and sector specific factor which is industry concentration are also significant in influencing the corporate financing decisions in this country along with firm specific factors such as efficiency, bankruptcy risk, profitability, tangibility, liquidity and size of the firm. The findings revealed that results are sensitive to models employed in the study. Nevertheless, the applicability of capital structure theories such as the trade-off theory, agency theory and pecking order theory diverge across sectors in Malaysia. The pecking order theory and agency theory are found to be the dominant theories governing the corporate financing decision in the country as well. It indicates strong evidence of hierarchy practised in firms’ financing decision. The finding on agency theory being dominant justifies the function of short-term debt as a controlling mechanism to mitigate the agency problem arises within firms across sectors.
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Buus, Tomáš. "A GENERAL FREE CASH FLOW THEORY OF CAPITAL STRUCTURE." Journal of Business Economics and Management 16, no. 3 (2014): 675–95. http://dx.doi.org/10.3846/16111699.2013.770787.

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This paper provides general framework for handling time-varying cost of capital, leverage, tax rates, and capital values in a dynamic free cash flow theory of capital structure. That enables efficient analysis of the recent competing theories of capital structure. After including the costs of financial distress and risk premium of debt in the cash flow model, this paper provides a new look at cost of tax shield from the point of view of risk-return relationship. Cost of tax shield is not constant, but depends on leverage and is mostly between cost of assets and cost of debt. Moreover the simulation of firm value and capital structure in presence of taxes, risk, and growth shows that unique optimal leverages exist for each combination of the above factors. The risk-enhanced cash flow theory can explain both the observations, which support pecking order theory, free cash flow theory and tradeoff theory of capital structure. Moreover it fits some evidence, which resists these theories: highly leveraged low growth companies and moderately leveraged large profitable companies.
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40

Olubukola Otekunrin, Adegbola, Tony Ikechukwu Nwanji, Damilola Eluyela, Johnson Kolawole Olowookere, and Damilola Gabriel Fagboro. "Capital structure and profitability: the case of Nigerian deposit money banks." Banks and Bank Systems 15, no. 4 (2020): 221–28. http://dx.doi.org/10.21511/bbs.15(4).2020.18.

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This paper aimed to empirically examine the extent to which capital structure impacts the profitability of Nigerian Deposit Money Banks considering the profitability of eight Nigerian Deposit Money Banks from 2003 to 2018 (16 years). A descriptive research design was adopted for this study, and data were analyzed using regression. The study used secondary data obtained from published annual reports of selected Nigerian Deposit Money Banks on the Nigerian Stock Exchange (NSE) for four years (2003–2018). The study concluded that the indicators used to measure capital structure (debt-equity ratio and leverage ratio) and profitability (returns on equity) had a negative relationship. This means that the use of debts mixed with equity (debt-equity ratio and leverage ratio) in improper proportion as financing methods can negatively affect profitability. Hence, there is a need to identify the optimal mix of capital structure (debts mixed with equity) that maximizes profitability, as well as firm and shareholder value with minimum agency costs as suggested by the trade-off theory and agency theory, respectively. The alternative is to give preference to retained earnings (internal source of finance) as funding source. AcknowledgmentAll researchers and non-researchers that contributed to this paper are highly appreciated.
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41

Bukalska, Elżbieta. "Testing trade-off theory and pecking order theory under managerial overconfidence." International Journal of Management and Economics 55, no. 2 (2019): 99–117. http://dx.doi.org/10.2478/ijme-2019-0008.

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Abstract We address our research to the problem of managerial overconfidence and financing behavior. The aim of the paper is, hence, to ascertain the pattern of financing decisions of overconfident managers and identify the relevant capital structure theory (trade-off or pecking order theory) that can be used to explain financing decisions of overconfident managers. We collected a sample of 145 private companies. The degree of overconfidence was distinguished by surveying the managers on overestimation, overplacement, and overoptimism. The financial data covers the period of 2010–2015. We calculated static ratios of capital structure and uncovered the determinants of capital structure. We then unveiled the target debt ratios using Fama and French methodology and identified the difference between target and actual debt ratios. We also calculated the value of deficit and the sources of financing according to Shyam-Sunder and Myers. We found that the companies managed by overconfident managers use higher value of equity and display similar debt ratios. They also utilize reverse pecking order preference—trying to use internal funds and then turning to equity. Moreover, we noted that companies managed by overconfident managers come closer to target debt ratios and implement more risky fixed assets financing strategies. The significance of our research is that we contribute to the understanding of capital structure decisions by taking into account behavioral biases and conducting comprehensive research on both static and dynamic capital structure.
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Tripathi, Vibha. "Agency Theory, Ownership Structure and Capital Structure: An Empirical Investigation in The Indian Automobile Industry." Asia-Pacific Management Accounting Journal 14, no. 2 (2019): 1–22. http://dx.doi.org/10.24191/apmaj.v14i2-01.

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Capital structure is not only the result of the various financial characteristics of the firm but is also determined by the decision makers. The study from the perspective of the Agency Theory, examines the relationship between ownership structure and the capital structure of the Automobile Industry in India from 2001 to 2014 by using panel data analysis. Debt Equity Ratio represented capital structure and Promoters Shareholding wasused as a proxy for ownership structure. The findings of the study after controlling for variables like assets turnover ratio, uniqueness and size reveal that ownership structure has a significant and positive relationship with capital structure showing postulates of the Agency Theory. The findings lend new insights to the fact that a majority of the Indian automobile firms which are family oriented promote the use of debt to mitigate agency costs unlike the popular belief that Indian firms follow the Pecking Order Theory. The existence of the Agency Theory signals to the probable investors about the managers-shareholders as well as shareholders-debtholders relationship, and its impact on company’s debt taking capacity. Keywords: capital structure, ownership structure, agency theory, panel data
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43

E.N., Mitenkova. "The choice of the capital structure of the company according to the framework of theories of capital structure." Ekologiya i stroitelstvo 4 (2015): 22–27. http://dx.doi.org/10.35688/2413-8452-2015-04-005.

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This article deals with the actual problem of choosing capital structure of a company, because debt ratio has an influence on making strategic decisions of the long-term company’s development, its investment risks, potential interest conflicts between management, owners and lenders. The article analyzes the principles of the construction of capital structure in terms of classical and modern theories of capital structure using methods of scientific knowledge: system analysis, synthesis, logical analysis, empirical researches. According to the first theory of the capital structure, developed by M. Miller and F. Modigliani through a number of strict preconditions, capital structure does not affect the company’s value. By adding a tax factor authors showed that in this case the choice of capital structure affects the company’s value, because debt capital increases it by the value of the tax shield. According to trade-off theory the main determinants of capital structure are the size of the tax shield, the probability of bankruptcy and the credit rating. According to the theory of the signal the capital structure depends on such factors as the information asymmetry and the credit rating. According to the pecking order theory capital structure the choice of it is determined by the hierarchy of sources of financing: firstly companies prefer to use internal sources of financing, then - debt financing. According to the market timing theory the key factors of capital structure are share price fluctuations. Analysis of various theories of the capital structure has showed that most theories have been developed by economists represented countries with developed markets. But developed countries and emerging countries have a lot of differences, which have an impact on choosing capital structure by companies.
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44

Jin, Keyu. "Industrial Structure and Capital Flows." American Economic Review 102, no. 5 (2012): 2111–46. http://dx.doi.org/10.1257/aer.102.5.2111.

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This paper provides a new theory of international capital flows. In a framework that integrates factor-proportions-based trade and financial capital flows, a novel force emerges: capital tends to flow toward countries that become more specialized in capital-intensive industries. This “composition” effect competes with the standard force that channels capital toward the location where it is scarcer. If the composition effect dominates, capital flows away from the country hit by a positive labor force/productivity shock—a flow “reversal.'' Extended to a quantitative framework, the model generates sizable current account imbalances between developing and developed countries broadly consistent with the data. (JEL F14, F21, F32, F41, L16, O19)
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Ghafoor Awan, Prof Dr Abdul, Prof Dr ZahirFaridi, and Abdullahi ShahbazAnwer Ghaz. "DETERMINENTS OF CAPITAL STRUCTURE: EVIDENCE FROM PAKISTAN SUGAR INDUSTRY." INTERNATIONAL JOURNAL OF MANAGEMENT & INFORMATION TECHNOLOGY 11, no. 2 (2016): 2694–701. http://dx.doi.org/10.24297/ijmit.v11i2.4861.

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Capital structure is one of the most complex areas of financial decision making because of its inter-relationship with other financial decision variables. Poor capital structure decisions can result in a high cost of capital which decreases the value of a firm. Effective capital structure decisions decrease the cost of capital and hence the value of a firm increases. The objective of this empirical study is to analyze the factors affecting capital structure of sugar industry in Pakistan and to check whether the results confirm or not pecking order theory and trade-off theory. Different theories of capital structure have been reviewed like Modigliani and miller theory, trade-off theory, pecking order theory and market timing theory to make assumptions regarding capital structure of sugar firms. The findings are based on empirical results using panel data techniques for a sample of 30 firms listed on Karachi Stock Exchange from 2008-2011. The results show that tangibility is positively associated with leverage whereas size of the firm and liquidity are negatively associated with leverage. The results of profitability and growth opportunities are insignificant.
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46

Shibru, W/Michael, Hamdu Kedir, and Yonas Mekonnen. "Factors Affecting the Financing Policy of Commercial Banks in Ethiopia." International Journal of Research in Business and Social Science (2147-4478) 4, no. 2 (2015): 44–53. http://dx.doi.org/10.20525/ijrbs.v4i2.25.

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Determining the optimal capital structure is one of the most fundamental policy decisions faced by financial managers. Since optimal debt ratio influences firm’s value, different firms determine capital structures at different levels to maximize the value of their firms. Thus, this study examines the relationship between leverage and firm specific (profitability, tangibility, growth, risk, size and liquidity) determinants of capital structure decision, and the theories of capital structure that can explain the capital structure of banks in Ethiopia. In order to investigate these issues a mixed method research approach is utilized, by combining documentary analysis and in-depth interviews. More specifically, the study uses twelve years (2000 - 2011) data for eight banks in Ethiopia. The findings show that profitability, size, tangibility and liquidity of the banks are important determinants of capital structure of banks in Ethiopia. However, growth and risk of banks are found to have no statistically significant impact on the capital structure of banks in Ethiopia. In addition, the results of the analysis indicate that pecking order theory is pertinent theory in Ethiopian banking industry, whereas there are little evidence to support static trade-off theory and the agency cost theory. Therefore, banks should give consideration to profitability, size, liquidity and tangibility when they determine their optimum capital structure.
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Radjamin, Iryuvita Januarizka Putri, and I. Made Sudana. "Penerapan Pecking Order Theory dan Kaitannya dengan Pemilihan Struktur Modal Perusahaan pada Sektor Manufaktur di Negara Indonesia dan Negara Australia." Jurnal Manajemen dan Bisnis Indonesia 1, no. 3 (2014): 451–68. http://dx.doi.org/10.31843/jmbi.v1i3.35.

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This study aimed to determine first , the difference between the capital structures in Indonesian manufacturing company with in Australia , and secondly to determine whether manufacturing companies in Indonesia and Australia applying the packing order theory in determining the capital structure . The analysis model used is the comparative analysis between the two groups of independent samples to determine differences in capital structure manufacturing company in Indonesia with a capital structure of manufacturing companies in Australia. Meanwhile, to determine whether manufacturing companies in Indonesia and Australian applying packing order theory, used Shyam - Sunder and Meyers models . The study was conducted on 42 Australian manufacturing companies and 33 manufacturing companies in Indonesia, which is selected by purposive random sampling over the period 2006-20010. The results showed a significant difference between capital structure manufacturing companies in Indonesia and in Australia. Manufacturing companies in Indonesia using long-term debt is relatively higher compared to manufacturing companies in Australia. In addition, it was also found that in determining capital structure manufacturing companies in Indonesia to implement packing order theory, while manufacturing companies in Australia are not .
 Keywords : Capital Structure, Deficit External Financing, Pecking Order Theory
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48

Degenne, Alain. "Social capital: a theory of social structure and action." Tempo Social 16, no. 2 (2004): 303–5. http://dx.doi.org/10.1590/s0103-20702004000200014.

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Zhao, Lanli. "Literature Review of Capital Structure Theory and Influencing Factors." Modern Economy 09, no. 10 (2018): 1644–53. http://dx.doi.org/10.4236/me.2018.910103.

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50

Azarian, Reza. "Social Capital: A Theory of Social Structure and Action." Acta Sociologica 44, no. 4 (2001): 341–43. http://dx.doi.org/10.1177/000169930104400407.

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