IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this book

Company Financing, Captial Structure, and Ownership: A Survey, and Implications for Developing Economies

  • Morten Balling
    ()

Registered editor(s):
  • Sanjiva Prasad
  • Christopher J. Green
  • Victor Murinde

This paper critically surveys the key literature on corporate financing policy, capital structure and firm ownership in order to identify the leading theoretical and empirical issues in this area. The theoretical component of the survey attempts to reconcile competing theories of capital structure and appraises recent models which use agency theory and asymmetric information to explore the impact of managerial shareholdings, corporate strategy and taxation on the firm's capital structure. The empirical component focuses on univariate analyses as well as multivariate models of capital structure, and makes a comparison between theoretical predictions and empirical results. Implications are identified in terms of promising research ideas (PRIs) for further research. The bulk of the empirical research that we survey is concerned with the experience of a few western industrial countries, and the implications of this research are assessed accordingly. However, we also aim to draw out implications for new research in developing and newly industrialised countries with an expanding corporate sector.

If 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.

File URL: http://www.suerf.org/docx/o_afdec7005cc9f14302cd0474fd0f3c96_1031_suerf.pdf
File Function: Main Text
Download Restriction: no

as
in new window

This book is provided by SUERF - The European Money and Finance Forum in its series SUERF Studies with number 12 and published in 2001.
ISBN: 978-3-902109-04-0
Handle: RePEc:erf:erfstu:12
Contact details of provider: Postal:
SUERF c/o OeNB, Otto-Wagner-Platz 3, A-1090 Vienna, Austria

Phone: +43/1/404 20 7216
Fax: +43/1/404 20 7298
Web page: http://www.suerf.org
Email:


More information through EDIRC

Order Information: Postal: SUERF c/o OeNB, Otto-Wagner-Platz 3, A-1090 Vienna, Austria
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
  2. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. repec:cep:stitep:/1990/217 is not listed on IDEAS
  4. Ang, James S. & Jung, Minje, 1993. "An alternate test of Myers' pecking order theory of capital structure: the case of South Korean firms," Pacific-Basin Finance Journal, Elsevier, vol. 1(1), pages 31-46, March.
  5. Alan J. Auerbach & Mervyn A. King, 1980. "Taxation, Portfolio Choice, and Debt-Equity Ratios: A General Equilibrium Model," NBER Working Papers 0546, National Bureau of Economic Research, Inc.
  6. Mervyn A. King, 1974. "Taxation and the Cost of Capital," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 21-35.
  7. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
  8. Kahle, Kathleen M. & Walkling, Ralph A., 1996. "The Impact of Industry Classifications on Financial Research," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 309-335, September.
  9. Glenn Boyle & Kelly Eckhold, 1997. "Capital structure choice and financial market liberalization: evidence from New Zealand," Applied Financial Economics, Taylor & Francis Journals, vol. 7(4), pages 427-437.
  10. Shenoy, Catherine & Koch, Paul D., 1996. "The firm's leverage-cash flow relationship," Journal of Empirical Finance, Elsevier, vol. 2(4), pages 307-331, February.
  11. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04.
  12. John M. Griffith, 1999. "CEO ownership and firm value," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 1-8.
  13. Lensink, Robert & Murinde, Victor & Green, Christopher J., 1999. "Are Polish firms risk-averting or risk-loving? : evidence on demand uncertainty and the capital-labour ratio in a transition economy," Research Report 99E13, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  14. Amihud, Yakov & Lev, Baruch & Travlos, Nickolaos G, 1990. " Corporate Control and the Choice of Investment Financing: The Case of Corporate Acquisitions," Journal of Finance, American Finance Association, vol. 45(2), pages 603-16, June.
  15. Downs, Thomas W, 1993. "Corporate Leverage and Nondebt Tax Shields: Evidence on Crowding-Out," The Financial Review, Eastern Finance Association, vol. 28(4), pages 549-83, November.
  16. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  17. D. K. Robertson & Richard B. Tress, 1985. "Bankruptcy Costs: Evidence from Small-Firm Liquidations," Australian Journal of Management, Australian School of Business, vol. 10(1), pages 49-60, June.
  18. Gardner, John C & Trzcinka, Charles A, 1992. "All-Equity Firms and the Balancing Theory of Capital Structure," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 15(1), pages 77-90, Spring.
  19. Chirinko, Robert S. & Singha, Anuja R., 2000. "Testing static tradeoff against pecking order models of capital structure: a critical comment," Journal of Financial Economics, Elsevier, vol. 58(3), pages 417-425, December.
  20. Warner, Jerold B, 1977. "Bankruptcy Costs: Some Evidence," Journal of Finance, American Finance Association, vol. 32(2), pages 337-47, May.
  21. Colin Mayer, 1986. "Corporation Tax, Finance and the Cost of Capital," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 93-112.
  22. Kim, Wi Saeng & Sorensen, Eric H., 1986. "Evidence on the Impact of the Agency Costs of Debt on Corporate Debt Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(02), pages 131-144, June.
  23. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
  24. Brennan, Michael J & Kraus, Alan, 1987. " Efficient Financing under Asymmetric Information," Journal of Finance, American Finance Association, vol. 42(5), pages 1225-43, December.
  25. Stulz, ReneM., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, Elsevier, vol. 26(1), pages 3-27, July.
  26. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
  27. Mayer, Colin & Alexander, Ian, 1990. "Banks and securities markets: Corporate financing in Germany and the United Kingdom," Journal of the Japanese and International Economies, Elsevier, vol. 4(4), pages 450-475, December.
  28. Chen, G M & Merville, L J, 1999. "An Analysis of the Underreported Magnitude of the Total Indirect Costs of Financial Distress," Review of Quantitative Finance and Accounting, Springer, vol. 13(3), pages 277-93, November.
  29. Castanias, Richard, 1983. " Bankruptcy Risk and Optimal Capital Structure," Journal of Finance, American Finance Association, vol. 38(5), pages 1617-35, December.
  30. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  31. Holderness, Clifford G. & Sheehan, Dennis P., 1988. "The role of majority shareholders in publicly held corporations : An exploratory analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 317-346, January.
  32. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  33. Zarowin, Paul, 1988. "Non-linearities and nominal contracting effects : The case of the depreciation tax shield," Journal of Accounting and Economics, Elsevier, vol. 10(2), pages 89-110, April.
  34. Fama, Eugene F, 1990. "Contract Costs and Financing Decisions," The Journal of Business, University of Chicago Press, vol. 63(1), pages S71-91, January.
  35. Fischer, Edwin O & Heinkel, Robert & Zechner, Josef, 1989. " Dynamic Capital Structure Choice: Theory and Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 19-40, March.
  36. Douglas W. Diamond, 1998. "Reputation Acquisition in Debt Markets," Levine's Working Paper Archive 602, David K. Levine.
  37. Short, Helen, 1994. " Ownership, Control, Financial Structure and the Performance of Firms," Journal of Economic Surveys, Wiley Blackwell, vol. 8(3), pages 203-49, September.
  38. David Cobham & Ramesh Subramaniam, 1995. "Corporate Finance in Developing Countries: New Evidence for India," CRIEFF Discussion Papers 9512, Centre for Research into Industry, Enterprise, Finance and the Firm.
  39. Kale, Jayant R & Noe, Thomas H & Ramirez, Gabriel G, 1991. " The Effect of Business Risk on Corporate Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, vol. 46(5), pages 1693-715, December.
  40. Alexander, Ian & Mayer, Colin, 1990. "Banks and Securities Markets: Corporate Financing in Germany and the UK," CEPR Discussion Papers 433, C.E.P.R. Discussion Papers.
  41. Harris, Milton & Raviv, Artur, 1990. " Capital Structure and the Informational Role of Debt," Journal of Finance, American Finance Association, vol. 45(2), pages 321-49, June.
  42. Scott, James H, Jr, 1977. "Bankruptcy, Secured Debt, and Optimal Capital Structure," Journal of Finance, American Finance Association, vol. 32(1), pages 1-19, March.
  43. DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March.
  44. Friend, Irwin & Lang, Larry H P, 1988. " An Empirical Test of the Impact of Managerial Self-interest on Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 43(2), pages 271-81, June.
  45. William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers 244, Cowles Foundation for Research in Economics, Yale University.
  46. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
  47. Hirota, Shinichi, 1999. "Are Corporate Financing Decisions Different in Japan? An Empirical Study on Capital Structure," Journal of the Japanese and International Economies, Elsevier, vol. 13(3), pages 201-229, September.
  48. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  49. Agrawal, Anup & Mandelker, Gershon N, 1987. " Managerial Incentives and Corporate Investment and Financing Decision s," Journal of Finance, American Finance Association, vol. 42(4), pages 823-37, September.
  50. Williamson, Oliver E, 1988. " Corporate Finance and Corporate Governance," Journal of Finance, American Finance Association, vol. 43(3), pages 567-91, July.
  51. Richard J. Zeckhauser & John Pound, 1990. "Are Large Shareholders Effective Monitors? An Investigation of Share Ownership and Corporate Performance," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 149-180 National Bureau of Economic Research, Inc.
  52. Judith Jordan & Julian Lowe & Peter Taylor, 1998. "Strategy and Financial Policy in UK Small Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(1&2), pages 1-27.
  53. Chowdhury, Gopa & Green, Christopher & Miles, David, 1994. "U.K. Companies' Short-Term Financial Decisions: Evidence from Company Accounts Data," The Manchester School of Economic & Social Studies, University of Manchester, vol. 62(4), pages 395-411, December.
  54. Haugen, Robert A & Senbet, Lemma W, 1978. "The Insignificance of Bankruptcy Costs to the Theory of Optimal Capital Structure," Journal of Finance, American Finance Association, vol. 33(2), pages 383-93, May.
  55. Hayne E. Leland and David H. Pyle., 1976. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Research Program in Finance Working Papers 41, University of California at Berkeley.
  56. Narayanan, M. P., 1988. "Debt versus Equity under Asymmetric Information," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(01), pages 39-51, March.
  57. Clarke, Richard N, 1989. "SICs as Delineators of Economic Markets," The Journal of Business, University of Chicago Press, vol. 62(1), pages 17-31, January.
  58. Mayer, Colin, 1988. "New issues in corporate finance," European Economic Review, Elsevier, vol. 32(5), pages 1167-1183, June.
  59. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  60. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
  61. Michel Poitevin, 1989. "Financial Signalling and the "Deep-Pocket" Argument," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 26-40, Spring.
  62. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
  63. Wald, John, 1999. "Capital structure with dividend restrictions," Journal of Corporate Finance, Elsevier, vol. 5(2), pages 193-208, June.
  64. Harvey James, 1999. "Owner as Manager, Extended Horizons and the Family Firm," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 41-55.
  65. Short, Helen & Keasey, Kevin, 1999. "Managerial ownership and the performance of firms: Evidence from the UK," Journal of Corporate Finance, Elsevier, vol. 5(1), pages 79-101, March.
  66. Guariglia, Alessandra, 1999. "The Effects of Financial Constraints on Inventory Investment: Evidence from a Panel of UK Firms," Economica, London School of Economics and Political Science, vol. 66(261), pages 43-62, February.
  67. Thatcher, Janet Solverson, 1985. " The Choice of Call Provision Terms: Evidence of the Existence of Agency Costs of Debt," Journal of Finance, American Finance Association, vol. 40(2), pages 549-61, June.
  68. Carl Chiarella & Toan Pham & Ah Boon Sim & Madeleine Tan, 1991. "Determinants of Corporate Capital Structure: Australian Evidence," Working Paper Series 3, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  69. Hutton, John P & Kenc, Turalay, 1998. "The Influence of Firms' Financial Policy on Tax Reform," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 663-84, October.
  70. Heinkel, Robert, 1982. " A Theory of Capital Structure Relevance under Imperfect Information," Journal of Finance, American Finance Association, vol. 37(5), pages 1141-50, December.
  71. Ang, James S & Chua, Jess H & McConnell, John J, 1982. " The Administrative Costs of Corporate Bankruptcy: A Note," Journal of Finance, American Finance Association, vol. 37(1), pages 219-26, March.
  72. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  73. Oliver Hart & John Moore, 1990. "A Theory of Corporate Financial Structure Based on the Seniority of Claims," STICERD - Theoretical Economics Paper Series 217, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  74. Brennan, Michael J & Schwartz, Edwardo S, 1978. "Corporate Income Taxes, Valuation, and the Problem of Optimal Capital Structure," The Journal of Business, University of Chicago Press, vol. 51(1), pages 103-14, January.
  75. Peyser, Paul S, 1999. "Firm-Theoretic Limitations on Proposition III," Review of Quantitative Finance and Accounting, Springer, vol. 12(1), pages 65-88, January.
  76. Vilasuso, Jon & Minkler, Alanson, 2001. "Agency costs, asset specificity, and the capital structure of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 44(1), pages 55-69, January.
  77. Galai, Dan & Masulis, Ronald W., 1976. "The option pricing model and the risk factor of stock," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 53-81.
  78. Vogt, Stephen C., 1994. "The role of internal financial sources in firm financing and investment decisions," Review of Financial Economics, Elsevier, vol. 4(1), pages 1-24.
  79. Jalilvand, Abolhassan & Harris, Robert S, 1984. " Corporate Behavior in Adjusting to Capital Structure and Dividend Targets: An Econometric Study," Journal of Finance, American Finance Association, vol. 39(1), pages 127-45, March.
  80. van der Wijst, Nico & Thurik, Roy, 1993. "Determinants of Small Firm Debt Ratios: An Analysis of Retail Panel Data," Small Business Economics, Springer, vol. 5(1), pages 55-65, March.
  81. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  82. Marsh, Paul, 1982. " The Choice between Equity and Debt: An Empirical Study," Journal of Finance, American Finance Association, vol. 37(1), pages 121-44, March.
  83. Sean Cleary, 1999. "The Relationship between Firm Investment and Financial Status," Journal of Finance, American Finance Association, vol. 54(2), pages 673-692, 04.
  84. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
  85. Gul, Ferdinand A., 1999. "Growth opportunities, capital structure and dividend policies in Japan," Journal of Corporate Finance, Elsevier, vol. 5(2), pages 141-168, June.
  86. Julie Hunsaker, 1999. "The role of debt and bankruptcy statutes in facilitating tacit collusion," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 9-24.
  87. Bradley, Michael & Jarrell, Gregg A & Kim, E Han, 1984. " On the Existence of an Optimal Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, vol. 39(3), pages 857-78, July.
  88. Heinkel, Robert & Zechner, Josef, 1990. "The Role of Debt and Perferred Stock as a Solution to Adverse Investment Incentives," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(01), pages 1-24, March.
  89. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  90. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-39, May.
  91. Chen, Carl R. & Steiner, Thomas L., 2000. "Tobin's q, managerial ownership, and analyst coverage: A nonlinear simultaneous equations model," Journal of Economics and Business, Elsevier, vol. 52(4), pages 365-382.
  92. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
  93. Jensen, Gerald R. & Solberg, Donald P. & Zorn, Thomas S., 1992. "Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(02), pages 247-263, June.
  94. Ross, Stephen A, 1985. " Debt and Taxes and Uncertainty," Journal of Finance, American Finance Association, vol. 40(3), pages 637-57, July.
  95. Gerald T. Garvey & Gordon Hanka, 1999. "Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage," Journal of Finance, American Finance Association, vol. 54(2), pages 519-546, 04.
  96. Smith, Clifford Jr. & Warner, Jerold B., 1979. "On financial contracting : An analysis of bond covenants," Journal of Financial Economics, Elsevier, vol. 7(2), pages 117-161, June.
  97. Corbett, Jennifer & Jenkinson, Tim, 1994. "The Financing of Industry, 1970-89: An International Comparison," CEPR Discussion Papers 948, C.E.P.R. Discussion Papers.
  98. Altman, Edward I, 1984. " A Further Empirical Investigation of the Bankruptcy Cost Question," Journal of Finance, American Finance Association, vol. 39(4), pages 1067-89, September.
  99. Singh, A. & Hamid, J., 1992. "Corporate Financial Structure in Developing Countries," Papers 1, World Bank - International Finance Corporation.
  100. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
  101. repec:dgr:rugsom:99e13 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:erf:erfstu:12. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dragana Popovic)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.