Skip to main content
SpringerLink
Log in
Book cover

Capital Structure in the Modern World pp 3–19Cite as

Palgrave Macmillan

Introduction

  • Chapter
  • First Online:

Abstract

Capital structure is a firm’s mix of debt and equity. For a long period of time, capital structure was considered a very “technical” area that concerned at most one or two employees in an average company. To a traditional business person, this area was unlikely to generate significant revenue compared to other areas of finance such as rightly chosen investment projects. In recent years, the situation has changed significantly. Capital structure has become an incredibly important and intriguing area of theoretical and practical finance. Here are some examples.

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   119.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD   159.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD   159.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

Notes

  1. 1.

    Manyika (August 2011).

  2. 2.

    Groom (July 24, 2007).

  3. 3.

    Gandel (December 4, 2015).

  4. 4.

    The Capital Structure Decisions of New Firms, Kauffman Foundation (2009).

    http://www.kauffman.org/what-we-do/research/kauffman-firm-survey-series/the-capital-structure-decisions-of-new-firms.

  5. 5.

    Net-present value and capital-asset pricing model.

  6. 6.

    For other surveys see Graham and Harvey (2002), Bancel and Mittoo (2004, 2011) and Brounen et al. (2006).

  7. 7.

    For a review of capital structure theory see, for example, Harris and Raviv (1991), Klein et al. (2002), Miglo (2011) and Khanna Srivastava and Medury (2014).

  8. 8.

    For a review of accounting principles see, for example, Wild, Shaw, and Chiappetta (2014).

  9. 9.

    The amount of available resources depends on the specific debt contract. In most cases the payment of debt requires cash. However, the firm always has an opportunity to sell its assets. So in most cases the amount of available resources is equal to the firm value as long it is expressed in market values.

References

  • Acharya, V., & Viswanathan, S. (2011). Leverage, moral hazard and liquidity. Journal of Finance, 66, 99–138.

    Article  Google Scholar 

  • Bancel, F., & Mittoo, U. (2004). Cross-country determinants of capital structure choice: A survey of European firms. Financial Management, 33, 103–132.

    Google Scholar 

  • Bancel F., & Mittoo, U. (2011). Survey evidence on financing decisions and cost of capital. In H. K. Baker, & G. Martin (Eds.), Capital structure and corporate financing decisions—Theory, evidence, and practice (pp. 229–248). Hoboken, New Jersey: John Wiley, Ch. 13.

    Google Scholar 

  • Brounen, D., De Jong, A., & Koedijk, K. (2006). Capital structure policies in Europe: Survey evidence. Journal of Banking & Finance, 30(5), 1409–1442.

    Article  Google Scholar 

  • Bulan, L., & Yan, Z. (2009). The pecking order theory and the firm’s life cycle. Banking and Finance Letters, 1(3), 129–140.

    Google Scholar 

  • Bulan, L., & Yan, Z. (2011). Firm maturity and the pecking order theory. International Journal of Business and Economics, 9(3), 179–200.

    Google Scholar 

  • Ewert, R., & Niemann, R. (2012). Limited liability, asymmetric taxation, and risk taking—Why partial tax neutralities can be harmful. Finanzarchiv/Public Finance Analysis, 68, 83–120.

    Article  Google Scholar 

  • Fisher, I. (1930). The theory of interest (1st ed.). New York: The Macmillan Co.

    Google Scholar 

  • Frank, M., & Goyal, V. (2008). Profits and capital structure, AFA 2009 San Francisco meetings paper. Available at SSRN: http://ssrn.com/abstract=1104886

  • Frank, M., & Goyal, V. (2009). Capital structure decisions: Which factors are reliably important? Financial Management, 38, 1–37.

    Article  Google Scholar 

  • Gandel, S. (2015, December 4). McDonald’s Jumbo bond deal finds hungry investors. Fortune. http://fortune.com/2015/12/04/mcdonalds-bond-deal/

  • Graham, J., & Harvey, C. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2–3), 187–243.

    Article  Google Scholar 

  • Graham, J., & Harvey, C. (2002). How do CFOs make capital budgeting and capital structure decisions? Journal of Applied Corporate Finance, 15(1), 8–23.

    Article  Google Scholar 

  • Graham, J., & Leary, M. (2011). A review of empirical capital structure research and directions for the future. Annual Review of Financial Economics, 3, 309–345.

    Article  Google Scholar 

  • Groom, N. (2007, July 24). McDonald’s reviews capital structure, CFO retiring. Reuters/Markets. http://www.reuters.com/article/2007/07/24/us-mcdonalds-results-idUSN2442330320070724

  • Harris, M., & Raviv, A. (1991). The theory of capital structure. The Journal of Finance, 46(1), 297–355.

    Article  Google Scholar 

  • Hennessy, C., Livdan, D., & Miranda, B. (2010). Repeated signaling and firm dynamics. Review of Financial Studies, 23(5), 1981–2023.

    Article  Google Scholar 

  • Horvath, M., & Woywode, M. (2005). Entrepreneurs and the choice of limited liability. Journal of Institutional and Theoretical Economics (JITE)/Zeitschrift für die gesamte Staatswissenschaft, 161(4), 681–707.

    Article  Google Scholar 

  • Jain, B., & Kini, O. (1994). The post-issue operating performance of IPO firms. Journal of Finance, 49(5), 1699–1726.

    Article  Google Scholar 

  • Khanna, S., Srivastava, A., & Medury, Y. (2014). Revisiting the capital structure theories with special reference to India. The International Journal of Business and Management, 8, 132–138.

    Google Scholar 

  • Klein, L., O’Brien, T., & Peters, S. (2002). Debt vs equity and asymmetric information: A review. The Financial Review, 37(3), 317–350.

    Article  Google Scholar 

  • Lemmon, M., & Zender, J. (2010). Debt capacity and tests of capital structure theories. Journal of Financial and Quantitative Analysis, 45, 1161–1187.

    Article  Google Scholar 

  • Lindhe, T., Sodersten, J., & Oberg, A. (2004). Economic effects of taxing different organizational forms under the Nordic dual income tax. International Tax and Public Finance, 11(4), 469–485.

    Google Scholar 

  • Loughran, T., Ritter, J., & Rydquist, K. (1994). Initial public offerings: International insights. Pacific-Basin Finance Journal, 2, 165–199.

    Article  Google Scholar 

  • Manyika, J. (2011, August). Google’s CFO on growth, capital structure, and leadership. McKinsey&Company. http://www.mckinsey.com/insights/corporate_finance/googles_cfo_on_growth_capital_structure_and_leadership

  • Miglo, A. (2007). A note on corporate taxation, limited liability and symmetric information. Journal of Economics (Springer), 92(1), 11–19.

    Google Scholar 

  • Miglo, A. (2011). Trade-off, pecking order, signaling, and market timing Models. In H. K. Baker & G. S. Martin (Eds.), Capital structure and corporate financing decisions: Theory, evidence, and practice (pp. 171–191). Wiley and Sons, Ch. 10.

    Google Scholar 

  • Modigliani, F., & Miller, M. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48(3), 261–297.

    Google Scholar 

  • Pereira, T., & Sousa, M. (2015). Is there still a Berlin Wall in the post-issue operating performance of European IPOs?. Available at SSRN: http://ssrn.com/abstract=2347535 or http://dx.doi.org/10.2139/ssrn.2347535

  • Ritter, J. (2014). Initial public offerings: Updated statistics. https://site.warrington.ufl.edu/ritter/files/2015/04/IPOs2013Un derpricing.pdf

  • Schiantarelli, F., & Jaramillo F. (2002). Access to long term debt and effects on firms’ performance: Lessons from Ecuador No 3153, RES Working Papers from Inter-American Development Bank, Research Department.

    Google Scholar 

  • Shyam-Sunder, L., & Myers, S. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of Financial Economics, 51(2), 219–244.

    Article  Google Scholar 

  • Singh, P., & Kumar B. (2008). Trade off theory or pecking order theory: What explains the behavior of the Indian firms? Available at SSRN: http://ssrn.com/abstract=1263226

  • Wild, J., Shaw, K., & Chiappetta, B. (2014). Fundamental accounting principles. McGraw-Hill Education, 22nd edition.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Nipissing University, Ontario, Canada

    Anton Miglo

Authors
  1. Anton Miglo
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

Copyright information

© 2016 The Editor(s) (if applicable) and The Author(s)

About this chapter

Cite this chapter

Miglo, A. (2016). Introduction. In: Capital Structure in the Modern World. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-30713-8_1

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-30713-8_1

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-30712-1

  • Online ISBN: 978-3-319-30713-8

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation