IDEAS home Printed from
   My bibliography  Save this book chapter

Theories of Optimal Capital Structure: A Managerial Discretion Perspective

In: Economics in a Changing World


  • Oliver Hart

    (Harvard University)


In the thirty or so years since the Modigliani-Miller theorem, scholars have worked to relax the theorem’s assumptions in order to obtain a better understanding of the capital structure of firms.2 This work has produced some important insights but has not yet delivered a fully coherent theory of optimal capital structure. For example, at present we do not understand very well the distinguishing features of debt and equity or why these claims, as opposed to the many instruments that could be chosen, are most frequently issued by firms. Given this state of affairs, existing explanations of the debt-equity ratio must be seen as still preliminary, as must efforts to use these explanations to understand global trends such as the large increases in leverage in the United States and United Kingdom during the 1980s.

Suggested Citation

  • Oliver Hart, 1996. "Theories of Optimal Capital Structure: A Managerial Discretion Perspective," International Economic Association Series, in: Beth Allen (ed.), Economics in a Changing World, chapter 10, pages 204-235, Palgrave Macmillan.
  • Handle: RePEc:pal:intecp:978-1-349-25168-1_10
    DOI: 10.1007/978-1-349-25168-1_10

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:intecp:978-1-349-25168-1_10. 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: . General contact details of provider: .

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.