Academia.edu no longer supports Internet Explorer.

To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to  upgrade your browser .

Enter the email address you signed up with and we'll email you a reset link.

  • We're Hiring!
  • Help Center

paper cover thumbnail

CAPITAL STRUCTURE THEORIES: A REVIEW

Profile image of International Research Journal Commerce arts science

Capital structure is the important part of the business performance. Here paper investigates the theories of the capital structure on the basis of review, from the start-up point. The focus and considered from Modigliani and Miller‟s capital structure irrelevance theory to recent theories, such as the pecking order and the market timing theory. There are various studies which have examined capital structure determinants also in the corporate finance literature. The famous theories on capital Structure are Pecking Order, Trade off theory and Agency Theory. As per these theories there are various determinants such as assets structure, profitability, growth opportunities, liquidity, company size, and dividend policywhich affect the leverage of the firm,

Related Papers

Dr. Saqib Muneer

research paper on capital structure pdf

In this paper the authors survey capital structure theories, from the start-up point, which is considered Modigliani and Miller's capital structure irrelevance theorem, to recent theories, such as the pecking order and the market timing theory. For each type of model, a brief overview of the papers surveyed and their relation to each other is provided.

Tropical Design Lab

Attaullah Shah

SSRN Electronic Journal

Ghassan Omet

Jaap Spronk

Science and Education Development Institute (SEDInst)

This paper seeks to examine the impact of stock volatility on capital structure choice of listed Nigeria firms in influencing their corporate financing strategy and performance analysis. The research work will examine if western capital structure theories (static trade-off, agency cost and pecking order theories) are applicable to listed Nigeria firms. The work also establishes that the balance of the argument supports the view that good corporate financing strategies impact positively on firms' performance. The research study analysed 47 listed firms on the Nigeria stock exchange over the period 1997-2007 using the OLS regression with the objective of observing firm effect on leverage on observed firms. The theoretical contributions of trade-off, agency and pecking order theories were examined in assessing impact of stock volatility on financing patterns for listed Nigerian firms. Results shows that Nigerian firms do not follow observed patterns observed in western countries. In analysing firm leverage, Nigeria firms were found to have a positive non-statistical significant correlation between income variability and leverage. Results reflect that to a large extent Nigeria firms do not follow the same financing pattern with western countries. INTRODUCTION The fluctuation in price of stocks and its influence on choice of capital structure for firms have drawn attention of both the academia and financial market participants in recent past. The importance of stock volatility is widespread in finance with portfolio managers, corporate treasurers, risk arbitrageurs having a close watch on stock volatility trends of their chosen firms as changes in prices of stocks could have a major impact on the funding pattern for the firm and expected cash flow for the firm and investors alike (Gregoriou, 2010): Firms raise capital using different combination of instruments in financing their investment decisions i.e. primary listing, secondary listing or issuing debt using different combinations of instruments such as ordinary equity, debt and hybrid securities which includes; preference shares, convertible and warrant debt as this tend to affect the capital structure of the firms.

Evans Kioko

Capital structure decision poses a lot of challenges to firms. Determining an appropriate mix of equity and debt is one of the most strategic decisions public interest entities are confronted with. A wrong financing decision has the tendency of stalling the fortunes of any business. Therefore, if managers are to achieve the goal of wealth maximization, conscious steps must be taken in the right direction and at the right time to identify those factors that must be taken into cognizance in determining appropriate financing mix. It is upon this premise that this conceptual piece is designed to guide the top echelons of corporate managers in capital structure decisions. The paper explores a vast body of literature in articulating critical issues in capital structure decision.

IOSR Journals

RELATED PAPERS

European Scientific Journal ESJ

Nirosha Hewa Wellalage

Imo Godwin Ibe

RELATED TOPICS

  •   We're Hiring!
  •   Help Center
  • Find new research papers in:
  • Health Sciences
  • Earth Sciences
  • Cognitive Science
  • Mathematics
  • Computer Science
  • Academia ©2024

IMAGES

  1. (PDF) Capital Structure

    research paper on capital structure pdf

  2. (PDF) Capital Structure Analysis of a Small Enterprise

    research paper on capital structure pdf

  3. Optimal capital structure

    research paper on capital structure pdf

  4. (PDF) Determinants of Capital Structure and Impact Capital Structure on

    research paper on capital structure pdf

  5. (PDF) Article on capital structure

    research paper on capital structure pdf

  6. (PDF) Graphing Capital Structure Analysis of IT Sector With Special

    research paper on capital structure pdf

VIDEO

  1. Capital structure theories practical question with answer,-April 2013,Oct 2014 April 2015

  2. Chapter 17 (Capital Structure Determination), Fundamentals of Financial Management

  3. CAPITAL STRUCTURE AND DECISION CORPORATE FINANCE BBS 4TH YEAR

  4. Part 1_Capital Structure_Meaning & Definition

  5. Capital Structure Audio Revision

  6. Capital structure... Forms.. Types.. Pattern... Importance

COMMENTS

  1. (PDF) Capital Structure Theory: An Overview

    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...

  2. Capital Structure

    Stewart C. Myers T he study of capital structure attempts to explain the mix of securities and financing sources used by corporations to finance real investment. Most of the research on capital structure has focused on the proportions of debt vs. equity observed on the right-hand sides of corporations' balance sheets.

  3. PDF Capital Structure: Definitions, Determinants, Theories and Link With

    Capital structure is the permanent financing of the company represented primarily by long-term debt and equity and deciding the suitable capital structure is the important decision of the financial management because it is closely related to the value of the firm.

  4. A meta-analysis: capital structure and firm performance

    pdf (213 KB) Abstract 1. Introduction 2. Literature review 3. Research methodology 4. Descriptive analysis 5. Quantitative analysis: overall effect size 6. Moderator analysis 7. Conclusion Abstract Purpose

  5. (PDF) Determinants of capital structure: A literature review

    ... This study's results support Sibindi's (2016) research, which can also prove that firm Age positively affects Capital Structure. Sibindi (2016) and Adair & Adaskou (2015) stated that...

  6. PDF Capital Structure and Debt Structure

    While a large body of agency-based theoretical research in corporate finance argues that corporate capital structure should include multiple types of debt (e.g, Diamond (1991, 1993), Park (2000), Bolton and Freixas (2000), DeMarzo and Fishman (2007)), the grand majority of empirical research continues to treat debt as uniform.

  7. [PDF] A Review of Empirical Capital Structure Research and Directions

    This paper reviews empirical capital structure research, concentrating on papers published since 2005. We begin by documenting three dimensions of capital structure variation: cross-firm, cross-industry, and within-firm through time. We summarize how well the traditional trade-off and pecking order approaches explain these sources of variation and highlight their empirical shortcomings.

  8. (PDF) Capital Structure Theories: A Comprehensive Review

    The capital structure includes different components such as debt, equity, and the firm's income (Khan, Rehan, Chhapra, & Sohail, 2021). According to Iqbal, Farooq, Sandhu, and Abbas (2018), the ...

  9. Research on capital structure determinants: a review and future

    ISSN: 1743-9132 Article publication date: 3 April 2017 Permissions Downloads 10464 Abstract Purpose The purpose of this paper is to study the status of studies on capital structure determinants in the past 40 years.

  10. Empirical Corporate Capital Structure

    Corporate capital structure has been a key, challenging puzzle for finance for more than 50 years. Why do firms use the observed financing methods? The literature has developed useful ideas and a much-improved sense of the relevant facts to solve this puzzle.

  11. Capital Structure Theories and its' Practice

    Capital structure is a methodical way to finance corporate operations using a mixture of both equity and debt. The relationship between equity financing and debt financing is examined by a list of capital structure theories that have been compiled in the literature.

  12. (PDF) Capital Structure and Factors Affecting Capital ...

    Nitesh vibhute Abstract and Figures Capital structure decisions are perhaps one of the most important decisions taken by financial managers. It is one of the important and challenging issues in...

  13. Capital structure and profitability: Panel data evidence of private

    The paper primarily studied the empirical relationship between capital structure, as measured by total and short-term debt ratios, and profitability of private banks in Ethiopia, for the period 2013/14 to 2018/19, using panel fixed effects. A survey of 16 private banks are included in the study.

  14. Full article: Influencing factors that determine capital structure

    The figure indicates that research on capital structure determinants over the past 7 years is generally on a fluctuating trend with a downward trend from the years 2014 to 2016. However, in 2017, 11 papers representing 16% of the entire published papers being reviewed were recorded.

  15. (PDF) A Study on the Determinants of Capital Structure ...

    Capital Structure A Study on the Determinants of Capital Structure: Evidence from India Authors: Atif Ghayas GITAM University Tasneem Khan Aligarh Muslim University Abstract and Figures

  16. The Effect of Capital Structure on Profitability: An Empirical Panel

    Modigliani and Miller ( 1958) demonstrated the irrelevance of capital structure in deciding firm value, although the assumption is valuable only in perfect market conditions, where all investors have free access to market information, and there are zero transaction costs and no tax difference between dividends and capital gains.

  17. A Study on Impact of Capital Structure on Profitability of Companies

    1. INTRODUCTION Capital structure make best use of the market worth of a company that is if a company requiring an appropriately intended capital structures the collective worth of the rights and proprietorship benefits of the stockholders are exploited. Effective and efficient utilization of the capital structure bring about cost reduction.

  18. (PDF) Impact of Capital Structure on Firm Performance

    Impact of Capital Structure on Firm Performance DOI: 10.54691/bcpbm.v40i.4385 CC BY 4.0 Authors: Anzi Yao Abstract The main focus of this essay is the relationship between capital...

  19. PDF A Brief Review of Capital Structure Theories

    This paper surveys literatures on five theories of capital structure theories from Modigliani and Miller research paper at 1958 to Halov and heider at 2004. There are two main sources of firms' financing: internal and external financing, internal ... Keywords: Capital structure, traditional trade-off theory, pecking order theory, market ...

  20. PDF Determinants of Capital Structure: Evidence from Hotel and Restaurant

    The main purpose of this study is to identify the determinants of capital structure of Sri Lankan Hotel and Restaurant companies in the light of the Static Trade off theory, Pecking Order theory and Agency Cost theory. Further this study intends to identify whether the decision of the companies concerning the leverage is in conformity with the ...

  21. (PDF) A Critical Literature Review of Capital Structure Theories

    2017 •. Md. Bokhtiar Hasan, PhD. The study begins with surveying the capital structure theories ranging from MM irrelevance to the latest theories. The survey mainly revolves around four recognized theories of capital structure; the trade-off theory, agency costs theory, pecking order theory, and market timing theory.

  22. CAPITAL STRUCTURE THEORIES: A REVIEW

    Capital structure is the important part of the business performance. Here paper investigates the theories of the capital structure on the basis of review, from the start-up point. The focus and considered from Modigliani and Miller‟s capital structure irrelevance theory to recent theories, such as the pecking order and the market timing theory.

  23. The moderating effect of corporate governance factors on capital

    The key purpose of this research paper is to explore the moderating effect of Corporate Governance on the relationship between accounting base financial performance i.e. ROA, and ROE and Capital ...

  24. PDF A Study on Impact of Capital Structure on Profitability of ...

    A Study on Impact of Capital Structure on Profitability of Indian Companies Rameet Kaur Sawhney*, Naina Kaur** and Puneet Kaur Dhingra*** Previously many scholars have concluded that overall capital structure is instrumental in guiding firm's subsequent growth, sustainability and profitability.