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Reassess of capital structure theories

Author

Listed:
  • Datta, Rajib
  • Chowdhury, Tasnim
  • Mohajan, Haradhan

Abstract

This study presents a review of major capital structure fiction. Capital structure decision is important for companies because it helps to increase firm value by ensuring that the company has enough resources to carry out planned investments using as much as possible the cheapest cost of capital. It therefore involves choices between the different sources of capital such as debt, equity and hybrid capital. The different sources of finance available to companies are also influenced by the quality and maturity of the financial system and the overall risk of operating in that environment. The paper identified a host of capital structure theories that are key contemplation in the financing structure of firms around the world. This review will help companies in emerging and underdeveloped economies identify the peculiarities in the choosing the appropriate blend of capital.

Suggested Citation

  • Datta, Rajib & Chowdhury, Tasnim & Mohajan, Haradhan, 2013. "Reassess of capital structure theories," MPRA Paper 51165, University Library of Munich, Germany, revised 10 Jul 2013.
  • Handle: RePEc:pra:mprapa:51165
    as

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    File URL: https://mpra.ub.uni-muenchen.de/51165/1/MPRA_paper_51165.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital structure; Cash flows; Financial risk; Principles; Theories.;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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