A Review of Empirical Capital Structure Research and Directions for the Future
AbstractThis article 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. We review recent research that attempts to address these shortcomings, much of which follows seven broad themes: (a) Important variables have been mismeasured in empirical tests, (b) the impact of leverage on nonfinancial stakeholders is important, (c) the supply side of capital affects corporate capital structure, (d) richer features of financial contracts have been underresearched, (e) value effects due to capital structure appear to be modest over wide ranges of leverage, (f) estimates of leverage adjustment speeds are biased, and (g) capital structure dynamics have not been adequately considered. Much progress has been made in addressing these issues, some of which has led to the study of an expanded range of capital structure topics, including debt maturity, loan and covenant characteristics, collateral effects, and alternative financing sources such as leasing and credit lines. We conclude by summarizing unanswered questions and areas for future research.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Annual Reviews in its journal Annual Review of Financial Economics.
Volume (Year): 3 (2011)
Issue (Month): 1 (December)
Contact details of provider:
Postal: Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA
Web page: http://www.annualreviews.org
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Lin, Shannon & Tong, Naqiong & Tucker, Alan L., 2014. "Corporate tax aggression and debt," Journal of Banking & Finance, Elsevier, Elsevier, vol. 40(C), pages 227-241.
- Strebulaev, Ilya A. & Yang, Baozhong, 2013. "The mystery of zero-leverage firms," Journal of Financial Economics, Elsevier, Elsevier, vol. 109(1), pages 1-23.
- Zhou, Qing & Faff, Robert & Alpert, Karen, 2014. "Bias correction in the estimation of dynamic panel models in corporate finance," Journal of Corporate Finance, Elsevier, Elsevier, vol. 25(C), pages 494-513.
- Colla, Paolo & Ippolito, Filippo & Wagner, Hannes F., 2012. "Leverage and pricing of debt in LBOs," Journal of Corporate Finance, Elsevier, Elsevier, vol. 18(1), pages 124-137.
- Mustafa Caglayan & Abdul Rashid, 2013.
"The Response of Firms' Leverage to Risk: Evidence from UK Public versus Non-Public ManufacturingFirms,"
CFI Discussion Papers, Centre for Finance and Investment, Heriot Watt University
1302, Centre for Finance and Investment, Heriot Watt University.
- Mustafa Caglayan & Abdul Rashid, 2014. "The Response Of Firms' Leverage To Risk: Evidence From Uk Public Versus Nonpublic Manufacturing Firms," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 341-363, 01.
- Thomas Hemmelgarn & Daniel Teichmann, 2013. "Tax Reforms and the Capital Structure of Banks," Taxation Papers, Directorate General Taxation and Customs Union, European Commission 37, Directorate General Taxation and Customs Union, European Commission.
- Schmid, Thomas, 2013. "Control considerations, creditor monitoring, and the capital structure of family firms," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(2), pages 257-272.
- Serena Fatica & Thomas Hemmelgarn & Gaetan Nicodeme, 2012.
"The Debt-Equity Bias: consequences and solutions,"
Taxation Papers, Directorate General Taxation and Customs Union, European Commission
33, Directorate General Taxation and Customs Union, European Commission.
- Serena Fatica & Thomas Hemmelgarn & Gaetan Nicodeme, 2013. "The Debt-Equity Tax Bias: Consequences and Solutions," Reflets et perspectives de la vie Ã©conomique, De Boeck UniversitÃ©, De Boeck UniversitÃ©, vol. 0(1), pages 5-18.
- Matthias Fahn & Valeria Merlo & Georg Wamser, 2014. "The Commitment Role of Equity Financing," CESifo Working Paper Series 4841, CESifo Group Munich.
- Drobetz, Wolfgang & Gounopoulos, Dimitrios & Merikas, Andreas & SchrÃ¶der, Henning, 2013. "Capital structure decisions of globally-listed shipping companies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, Elsevier, vol. 52(C), pages 49-76.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (http://www.annualreviews.org).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.