scispace - formally typeset
Open AccessJournal ArticleDOI

The Determinants of Capital Structure Choice

Sheridan Titman, +1 more
- 01 Mar 1988 - 
- Vol. 43, Iss: 1, pp 1-19
Reads0
Chats0
TLDR
In this paper, the explanatory power of some of the recent theories of optimal capital structure is analyzed empirically and a factor-analytic technique is used to mitigate the measurement problems encountered when working with proxy variables.
Abstract
This paper analyzes the explanatory power of some of the recent theories of optimal capital structure. The study extends empirical work on capital structure theory in three ways. First, it examines a much broader set of capital structure theories, many of which have not previously been analyzed empirically. Second, since the theories have different empirical implications in regard to different types of debt instruments, the authors analyze measures of short-term, long-term, and convertible debt rather than an aggregate measure of total debt. Third, the study uses a factor-analytic technique that mitigates the measurement problems encountered when working with proxy variables.

read more

Citations
More filters
Journal ArticleDOI

The capital structure of multinational corporations: Canadian versus U.S. evidence☆

TL;DR: The authors showed that Canadian multinational corporations display higher leverage than domestic firms (DCs) due to lower agency costs of debt associated with MNCs' U.S. operations, and they also found that the Canadian firms with international bond market access have higher leverage compared with firms without such access.
Journal ArticleDOI

A comparison of neural network and multiple regression analysis in modeling capital structure

TL;DR: Results of this study show that the determinants of capital structure are different in both industries, and it seems that the relationships between debt ratio and independent variables are not linear.
Journal ArticleDOI

Determinants of capital structure choice and empirics on leverage behavior: a comparative analysis of hotel and manufacturing firms.

TL;DR: In this paper, a cross-sectional regression analysis of the leverage behavior of 33 firms in two industry groups (the hotel industry and the manufacturing sector) was examined, finding that all leverage determinants studied, excepting firm size, are significant in explaining leverage variations in debt behavior.

Determinants of Capital Structure Evidence from Libya

Abstract: This paper provides further evidence of the capital structure theories pertaining to a developing country and examines the impact of the lack of a secondary capital market by analysing a capital structure question with reference to the Libyan business environment. The results of cross-sectional OLS regression show that both the static trade-off theory and the agency cost theory are pertinent theories to the Libyan companies’ capital structure whereas there was little evidence to support the asymmetric information theory. The lack of a secondary market may have an impact on agency costs, as shareholders who are unable to offload their shares might exert pressure on management to act in their best interests.
Journal ArticleDOI

Capital structure with risky foreign investment.

TL;DR: In this article, the authors investigate the effect of foreign political risks on leverage of multinational firms and find that firms in industries whose returns are most susceptible to political influence reduce their leverage.
References
More filters
Journal ArticleDOI

Theory of the firm: Managerial behavior, agency costs and ownership structure

TL;DR: In this article, the authors draw on recent progress in the theory of property rights, agency, and finance to develop a theory of ownership structure for the firm, which casts new light on and has implications for a variety of issues in the professional and popular literature.
Journal ArticleDOI

Significance tests and goodness of fit in the analysis of covariance structures

TL;DR: In this article, a general null model based on modified independence among variables is proposed to provide an additional reference point for the statistical and scientific evaluation of covariance structure models, and the importance of supplementing statistical evaluation with incremental fit indices associated with the comparison of hierarchical models.
Journal ArticleDOI

Corporate financing and investment decisions when firms have information that investors do not have

TL;DR: In this paper, a firm that must issue common stock to raise cash to undertake a valuable investment opportunity is considered, and an equilibrium model of the issue-invest decision is developed under these assumptions.
Journal ArticleDOI

Determinants of corporate borrowing

TL;DR: In this article, the authors predict that corporate borrowing is inversely related to the proportion of market value accounted for by real options and rationalize other aspects of corporate borrowing behavior, such as the practice of matching maturities of assets and debt liabilities.
Journal ArticleDOI

Debt and taxes

TL;DR: Miller et al. as discussed by the authors presented a paper on the thirty-fiveth annual meeting of the American Finance Association, Atlantic City, New Jersey, September 16-18, 1976 (May, 1977), pp. 261-275.
Related Papers (5)