The Determinants of Capital Structure Choice
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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
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References
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The effect of capital structure on a firm's liquidation decision☆
TL;DR: In this paper, the authors suggest that capital structure can control the incentive/conflict problem of an agency relationship by serving as a prepositioning or bonding mechanism, which ensures that incentives are aligned so that the firm implements the ex-ante value-maximizing liquidation policy.
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The option pricing model and the risk factor of stock
Dan Galai,Ronald W. Masulis +1 more
TL;DR: In this paper, a combined capital asset pricing model and option pricing model is considered and then applied to the derivation of equity's value and its systematic risk and the effects of these properties on the securityholders of firms with less than perfect "me first" rules.
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Corporate Financial Structure and Managerial Incentives
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An Empirical Investigation of the Arbitrage Pricing Theory
Richard Roll,Stephen A. Ross +1 more
TL;DR: In this article, empirical tests for Ross' [48] arbitrage theory of asset pricing are reported for individual equities during the 1962-72 period, at least three and probably four priced factors are found in the generating process of returns.
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