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Main Theories of Capital Structure

In: The Brusov–Filatova–Orekhova Theory of Capital Structure

Author

Listed:
  • Peter Brusov

    (Financial University under the Government of Russian Federation)

  • Tatiana Filatova

    (Financial University under the Government of Russian Federation)

  • Natali Orekhova

    (Financial University under the Government of Russian Federation)

Abstract

Under the capital structure, one understands the relationship between equity and debt capital of the company. Does capital structure affect the company’s main settings, such as the cost of capital, profit, value of the company and the other, and, if affected, how? Choice of an optimal capital structure, i.e., a capital structure, which minimizes the weighted average cost of capital and maximizes the value of the company, is one of the most important tasks solving by financial manager and the management of a company. The first serious study (and first qualitative study) of capital structure of the company influence on its indicators of activities was the work by Modigliani–Miller (Modigliani and Miller Am Econ Rev 48:261–297, 1958). Until this study, the approach existed (let us call it traditional), which was based on empirical data analysis. The Modigliani–Miller theory and its numerous modifications are discussed.

Suggested Citation

  • Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Main Theories of Capital Structure," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 51-71, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-27929-4_3
    DOI: 10.1007/978-3-031-27929-4_3
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