Showing papers on "Individual capital published in 1995"

“Bowling Alone: America’s Declining Social Capital”

Abstract: After briefly explaining why social capital (civil society) is important to democracy, Putnam devotes the bulk of this chapter to demonstrating social capital’s decline in the United States across the last quarter century. (See Putnam 1995 for a similar but more detailed argument.) While he acknowledges that the significance of a few countertrends is difficult to assess without further study, Putnam concludes that crucial factors such as social trust are eroding rapidly in the United States. He offers some possible explanations for this erosion and concludes by outlining the work needed to consider these possibilities more fully.

The role of capital in financial institutions

Abstract: This introductory article examines the role of capital in financial institutions — why it is important, how market-generated capital ‘requiremenents’ differ from regulatory requirments and the form that regulatory requirements should take. Along the way, we examine historical trends in bank capital, problems in measuring capital, and some possible unintended consequences of capital requirements. Within this framework, we evaluate how the contributions to this special issue advance the literature and suggest topics for future research.

Forms of Capital and Social Structure in Cultural Fields: Examining Bourdieu's Social Topography

Abstract: This article tests one key assumption of Bourdieu's theory of culture fields: that actors are positioned in a "topography" of social relations according to their endowments of economic, social, and cultural capital. Blockmodeling procedures are used to analyze data on German writers and to indentify a social structure in which positions vary according to the types and amounts of capital accumulated. A strong split between elite and marginal writers dominates the social structure, and even the fundamental distinction between high and low culture is embedded in this bipartition. Significant differences in both cultural and social capital distinguish elite from nonelite positions; within this bipartition, pronounced differences in cultural capital separate high and low culture. Relative to cultural and social capital, economic capital plays a lesser role in understanding the social structure of cultural fields.

Natural Capital and Human Economic Survival

Abstract: Foreword Preface The Ecological Economics Perspective and Why It's Needed The Origins of Our Economic Worldview The Ecological Economics Perspective The Definition, Function and Valuation of Natural Capital What Natural Capital Is and Does Depletion and Valuation Managing Natural Capital for Sustainability Investing in Natural Capital: Incentives and Obstacles Some Investment Strategies Afterward Appendix: Some Tools for Personal and Community Action Glossary References Index

Access to Social Capital

Abstract: Defining social capital as perceived access to time and money help from friends and family, this article examines (a) the stock of social capital to which families have access, (b) the trade-off between access to money and time help, and (c) the association between perceived access to time and money help and conventional measures of family economic well-being. Data come from the 1980 wave of the Panel Study of Income Dynamics, an ongoing longitudinal survey of U.S. households. More than 9 out of 10 families reported access to social capital. Some evidence for isolation from social capital among families with a less-educated or older head was found. Surprisingly, families in very poor neighborhoods reported more access to social capital, primarily in friend-based networks. Finally, geographic mobility leads to increased social isolation, because it reduces family ties.

Applications of social capital theory

Abstract: Experiments and studies were conducted to investigate the role of social capital. Social capital (relationship to others) is a productive asset which is a substitute for and complement to other productive assets. The productivity of social capital leads to the expectation that firms and individuals invest in relationships. Data were collected to answer the following questions: Does the identity (relationship) of trading partners affect selling and buying prices; the acceptance of catastrophic risk; the choice of share or cash leases in agriculture; loan approval; and banks investment to retain customers? The evidence is in the afffirmative.

Building human capital for better lives

Abstract: The key words in today's development economics are human capital. More and more emphasis is being placed on investments in education, health, and nutrition as a means of bettering the lives of people in developing countries. There is now enough theoretical and empirical evidence to indicate that both public and private investments in people contribute significantly to economic growth and the alleviation of poverty. This report examines past advances and current problems in this area of investment and presents the strategies most likely to reduce those problems. It also explains how the World Bank helps countries build human capital.

Social security and strategic inter-vivos transfers of social capital

Abstract: This paper explains public provision of social capital in an overlapping generations model with ‘gerontocracy’, without resort to any bequest motive. The old generation has an incentive to provide education and infrastructure because these goods shift the Laffer curve of social security taxation, thereby increasing old-age income in the political equilibrium. The incentive is stronger if population growth is larger. The marginal productivity of social capital in the political equilibrium may exceed or fall short of the marginal productivity of social capital in an efficient allocation.

Self-employment and intergenerational transfers of physical and human capital: an empirical analysis of French data

Abstract: Using The 1991 French Household Survey of Financial Assets, we examine the determinants of self-employment using data on intergenerational transfers of wealth, education, informal human capital and a range of demographic variables. We find evidence of the importance played by the family in the decision to enter self-employment. Intergenerational transfers of wealth, familial transfers of human capital and the structure of the family are determining factors in the decision to move from wage work into entrepreneurship. We also find robust evidence that a person is less likely to move into self-employment i f he obtains a third level education. Thus the higher education system in Prance appears to mitigate against the movement into self-employment from wage work. I I N T R O D U C T I O N AND R E V I E W T he topic of self-employment has received little attention in empirical economics literature until relatively recently, despite the economic importance of this sector. The significance of self-employment is reflected in Paper presented at the Ninth Annual Conference of the Irish Economic Association. * Thanks are due to seminar participants at the Irish Economic Association Annual Conference, May 1995, the \"Mapping European Family and Household Patterns\" workshop, CEPS, Luxem­ bourg, 28-29 January 1995 and at Staffordshire University for helpful comments. Thanks also to Guy Laroque, David Madden, Frank Barry and Peter Wright. This study was undertaken when Peter McEntee was a research associate at CREST, INSEE. The authors gratefully acknowledge the partial funding of this research by the EU under the \"Human Capital and Mobility Pro­ gramme\" (Contract no. chrx-ct93-0236). The usual disclaimer applies. the fact that 10.9 per cent of French households were classified as selfemployed in 1991. 1 However, over the long run, the proportion of selfemployed in the labour force has declined in France (Zarca, 1993). Given the present level of French unemployment, it is therefore important to under­ stand the determinants and the economic factors that shape self-employment. Much of the existing literature concentrates on the role of liquidity and the ability of an agent to acquire physical capital which is perceived as central to the selection into self-employment. The presence of liquidity constraints implies that either entrepreneurs are unable to establish a business in the start-up stage or that they are forced to employ suboptimal levels of capital in the running of an existing business. Thus it is widely held that the supply of entrepreneurship is constrained by the inability to access capital markets. Evans and Jovanovic (1989), using U S data from the National Longitudinal Survey of Young Men 1966-1981, set out and estimate a model of entre­ preneurial choice under liquidity constraints. They find that, on average, entrepreneurs are limited to only one and one-half times their initial wealth when starting a business. Their data points to the fact that people with more wealth have a higher probability of being selected into self-employment. This, they say, is evidence that people with insufficient funds are inclined to be excluded from starting a business. Employing U S data from the National Longitudinal Survey of Young Men for 1966-1981 and Current Population Surveys for 1968-1987, Evans and Leighton (1989) point to evidence that the probability of moving into self-employment increases with net worth. This again suggests that entrepreneurs face binding liquidity constraints in their choice between self-employment and wage work. Blanchflower and Oswald (1991) side-step potential endogeneity problems of variables such as net worth by looking at inheritance and gifts. Using probit analysis of The National Child Development Study 1958-1981, they report that the receipt of a gift or inheritance of £5,000 approximately doubles the probability of a person setting up a business. Holtz-Eakin et al. (1994) suggest that the probability of becoming an entrepreneur is affected by the size of inheritance received. I n this study we concentrate on the self-employed household rather than on the individual level of previous studies. This allows us investigate the transfer of human capital, the influence of intergenerational transfers of physical capital and selected demographic aspects of the family in the decision to become your own boss. Section I I describes the data base and the sample. A model is presented in Section I I I and the explanatory variables 1 That is the reference person reported running his/her own business. Source: INSEE, Enquete sur les Actifs Financiers 1991. Population found using weights derived at INSEE (for technical details see Dumontier and Valdelievre (1994)). outlined in Section IV. The results of a cross-sectional probit are presented in Section V . Section V I examines the probability of transition to self-employ­ ment for non-family entrepreneurs. A conclusion is given in Section V I I . I I T H E DATA B A S E The data were drawn from the 1991 French Household Survey of Financial Assets (Enquete sur les Actifs Financiers). The data set is unique in that it provides detailed biographical information which includes family background, education, intergenerational transmissions of gifts and inheritance, household assets and household debt. Questions were framed firstly in regard to the reference person and then in terms of a spouse (if applicable). The \"cleaned\" data set contains responses from 9,530 households. I n order to maintain a clear definition of self-employment, we classify only those households whose reference person was self-employed in his/her first job. 2 Only those 65 years of age or less were included in order to minimise the influence of retirement. Farmers were excluded as it is generally recognised that the character of intergenerational transmissions of physical and human capital in agriculture are particular to that sector. 3 Those in the liberal professions (doctors, lawyers, etc.,) were excluded as their education profile is different from other self-employed, such as managers of a small enterprise or retail outlet owners. Women were also excluded because it was difficult to distinguish whether self-employed husband and wife worked together in the same business or in separate enterprises. 4 This left 5,079 households, among whom 868 male respondents reported being self-employed in their main job. They mostly consisted of shopkeepers (230), craftsmen (528 ), owners of small businesses and self-employed chief executives of businesses employing more than 10 people (70). I l l T H E M O D E L As proposed by Rees and Shah (1986), the utility received from being either self-employed (SE) or in wage work (WW) may be set out as: 2 Our sample only includes households whose reference persons reported being in the labour force at the time of answering. Thus households whose reference persons were students, persons doing military service, retired, housewives and withdrawn from the labour force due to illness were not included in the sample (or any of the analysis which follows). 3. Lentz and Laband (1990), for example, point out that the rate of occupational inheritance among them is five times higher than among other proprietors, even when the amount of physical capital transferred between generations is the same. 4 Also, 38 per cent of women reported not being in either wage work or self-employment at the time of the survey. Utility from self-employment: ^> = ^ k * ) + ^ Utility from wage sector: U w = W where % is the uncertain profit from engaging in enterprise, which is a function of obtaining that level of capital needed to set up in business, k*. V is the utility gained from the application of \"entrepreneurial vision\" (including the utility gained from being independent). W refers to the wage level. The perceived utility from the application of entrepreneurial vision may be affected by education, informal human capital from parents, family demography and region where the person lives. 7i(k*) depends on the person's access to capital. Therefore, U ; =7t(k*) + V = cc i 0 K + a i l E d + a i 2 Ihk + a i 3 F d + a i 4 Region + u (1) U w = W = a w l E d + a w 2 Ihk + a w 3 F d + a w 4 Region + e (2) where E d refers to level of education attained and Ihk to the receipt of informal human capital. F d denotes family demography. (Section I V provides detailed explanation of chosen dependent variables) p. and £ are error terms. A person enters self-employment if: U ; U w > a i 0 K + ( a u a w : ) E d + ( 0 then an individual chooses self-employment, where Z * = 7 0 K + Y x E d + y 2 Ihk + y3 F d + Y 4Region + % where Yo = io» Y i = (« i i a wi) etc., Z * is the difference in utility between wage work, U w , and being self employed^ U ; and is known only to the individual who makes his decision. We do not observe Z* but we observe the outcome of the decision, i.e., whether the individual is self-employed or a salaried worker. Here Z = 1, if the person is self-employed, given that Z* > 0 Z = 0, if the person is a wage worker, given that Z* < 0. I V E X P L A N A T O R Y V A R I A B L E S Physical Capital: The fact that the data are cross sectional means that we encounter endogeneity problems in regard to the use of wealth as an explanatory variable. We cannot be sure whether a person enters selfemployment because he has easier access to capital through the wealth he has accumulated or he accumulated greater wealth due to the fact that he is self-employed. In order to reduce the potential problem of endogeneity, we employ five variables to investigate the importance of liquidity constraints. Three out of the five are direct intergenerational transfers of wealth. Inheritance and gifts (excluding enterprises) may be viewed as a transfer of wealth that is unlikely to be d

The role of human capital in economic growth: New results and alternative interpretations

Abstract: While it is largely uncontroversial that human capital can be considered as one of the shaping factors of economic growth, no agreement exists on the specific role of human capital formation. Competing theories all stressing different aspects of human capital formation are not in short supply, but the empirical evidence in support of one view or another is largely missing. To be able to discriminate between alternative interpretations, it would be useful to know whether physical or human capital has a larger impact on output per capita and whether the returns to all capital are constant, increasing, or decreasing. Depending on the answers, rather different implications for the role of human capital could emerge.

Roads to Equality: Wealth Distribution Dynamics with Public-Private Capital Complementarity

Abstract: This paper proposes a model of wealth distribution dynamics with a capital market imperfection and a production function where public capital is complementary to private capital. A unique invariant steady-state distribution is derived, with three social classes: subsistence workers, 'government dependent' middle-class entrepreneurs and 'private infrastructure owning' upper-class entrepreneurs. It is shown that there is a minimum level of public investment below which the middle class disappears, and that increases in non-targeted public investment over some range lead to unambiguously less inequality of opportunity, as well as to greater output. This provides an additional rationale for an active role for the government in infrastructure, health and education provision, and has implications for foreign aid.

An Empirical Test of the Cultural Capital Hypothesis

Abstract: Using data from the Multi-City Survey of Urban Inequality, an exploratory, empirical analysis of the cultural capital hypothesis was conducted. The analyses indicate that, while the types of cultural influences cited by proponents of this thesis clearly have negative effects on employment when viewed in isolation from other factors, they are not significant when statistical controls for human capital variables are incorporated into the model. Our findings suggest the need to invest more resources in the public education system and in efforts to combat racial discrimination in the labor market.

Social Capital and Economic Cooperation

Abstract: The socioeconomic movement is an effort to better explain human behavior by combining insights of economists and sociologists. This paper contributes to the socioeconomic literature by including the influence of relationships, values, and social bonds in the neoclassical economic model by introducing social capital coefficients. The usefulness of the resulting social capital model is demonstrated theoretically in a two-firm cooperative model and tested empirically using data from a survey of students who allocate their time between individual and joint projects.

The internationalisation of capital and Marxian value theory

Abstract: Marxist value analysis has paid little attention to the international movement of capital. This paper contends that there are different but compatible concepts of international capital movement in value theory, which are associated with different meanings of 'capital' in each volume of Karl Marx's Capital. With particular emphasis on a Volume III conception of international prices of production, the paper contends that exchange rates and a nationally determined value of labor power express an underlying contradiction between the internationality of value and the role of the national state in the regulation of accumulation. (c) 1995 Academic Press, Inc. Copyright 1995 by Oxford University Press.

An Islamic perspective on capital markets and "Islamic" securities in Malaysia

Abstract: Financial systems channel funds in an economy from the surplus economic units lacking appropriate investment opportunities to the deficit economic units with such opportunities. The surplus units seeking returns by employing their funds in productive activities and the deficit units interested in exploiting their investment opportunities contact one another through a network of financial markets and institutions in the economy. The participants make financial contracts in ways which satisfy their requirements regarding liquidity, denomination, maturities, and risk diversification [Anwar (1987), pp. 296-297]. In this way, the financial markets contribute to a higher production, efficiency, and economic welfare of everyone in the society [Mishkin (1989), p. 45]. In recent years, the appetite for investment in the markets of developing countries has increased manyfold [Hussain (1994), p. 2]. A good many of such developing markets are in Islamic countries such as Egypt, Turkey, Bangladesh, Pakistan, and Malaysia. Well-developed Islamic financial markets would contribute towards economic development by attracting capital inflows and checking capital flight from the Islamic nations. Islamisation of financial institutions, especially banking and insurance, has received sufficient attention since 1950. In fact, a number of Islamic banks and insurance companies are now operating worldwide. Islamisation of financial markets has, however, received relatively little attention from the academic and practitioners, although some "Islamic" securities have been introduced in several Muslim countries including Pakistan, Jordan, Sudan, Iran, and Malaysia. The major task of this study is to discuss the "Islamicity" of the main activities in the conventional capital markets and the Malaysian "Islamic" capital market instruments in the light of Islamic principles. The study is organised as follows. An Islamic criteria for portfolio management through capital market activities is developed in Section 2. The "Islamicity" of conventional capital market (with an emphasis on secondary markets) operations and the "Islamic" capital market in Malaysia are discussed in Sections 3 and 4 respectively. Additional recommendations towards the Islamisation of capital markets are made in the final section.

Citizens, Clients, And Consumers: Building Social Capital.

Abstract: This paper addresses the potential of various proposals to reform a broad group of human-service organizations. It challenges two reform strategies that currently receive considerable attention. One strategy promotes collaboration among human-service organizations in an effort to deliver services to clients more efficiently and effectively. A second approach relies on a marketplace model to give consumers of services greater choice in an effort to make organizations more responsive to people's needs. It is argued that these two reform strategies focus too much on process--collaboration and consumer choice--and fail to give adequate considerations to outcomes and goals. They both take for granted the goal of increasing the independence of individual clients or consumers. They fail to address the collective needs of people and communities and do not recognize membership in a community as a resource. In contrast, the paper argues that the goal of human services should be to foster interdependence among people through the development of "social capital"--strengthening the organization of families, neighborhoods, and communities. New York City's Beacons program, in which citizen participation is a norm, is described as a promising example of the school-centered, citizen-participation model of institutional reform. (LMI) *********************************************************************** Reproductions supplied by EDRS are the best that can be made from the original document. *********************************************************************** CENTER ON ORGANIZATION AND RESTRUCTURING OF SCHOOLS yr En 4 "1" 00 En [LI University of WisconsinMadison Wisconsin Center for Education Research 1025 W. Johnson St. Madison, WI 53706 (608) 263-7575 CITIZENS, CLIENTS, AND CONSUMERS: BUILDING SOCIAL CAPITAL Gary G. Wehlage and Julie A. White University of WI-Madison

Is Public Capital Productive? A Review of the Evidence

Abstract: An recent years, analysts and policymakers have voiced concern that public investment in the United States may be too low. In response, the Clinton administration's original economic strategy emphasized a plan to expand investment in public infrastructure. Now, however, the Republican-controlled Congress is looking for ways to achieve a balanced budget by the year 2002. When the budget ax falls, will infrastructure programs be among those targeted for cuts? In making such decisions, policymakers need to consider the evidence regarding the productive effects of public capital on the U.S. economy.

International financial integration and full employment monetary policy

Abstract: This paper argues that gross, short-term capital mobility is excessive, but that long-term net capital mobility remains low. This combination of extremely high gross, but low net capital mobility can create great difficulties in achieving full employment. However, these difficulties fundamentally depend on the political structure and the choices made in individual nations; they do not result from technological advances, such as innovations in computers and communication. Faced with short-term capital mobility, groups and classes within nations have made political choices that hinder the ability of the nation to reach full employment. But other choices can be made.Nations can adopt political structures and rules of the game that reduce the constraints to achieving full employment.

Infrastructure, Human Capital, and International Trade

Abstract: This paper presents a general equilibrium model of trade and international capital mobility. Its special features are that productive sectors are differentially influenced by the provision of a public intermediate input or "infrastructure" and that there is an endogenous mechanism for converting unskilled into skilled labor. The "hi-tech" sector uses capital and skilled labor and the "traditional" sector uses capital and unskilled labor, which is also used for the public input and final public services. It is shown that a preference for private over public consumption, due either to consumer tastes or public policy, will lead an economy to have a comparative advantage in the "hi-tech" sector, higher wages, and a more skilled labor force.

The Capital Jury Project: The Role of Responsibility and How Psychology Can Inform the Law

Abstract: As an experimental social psychologist, my discussion will address how psychology research and theory can help us focus on, understand, and perhaps offer suggestions and solutions for the issues and concerns about capital jury decision-making that the Capital Jury Project (\"CJP\") has raised. Psychology can play a role in two different ways. First, the law itself, in terms of legal doctrine and practice, and the specific instructions to jurors in capital cases, makes certain assumptions about how people think, act, make decisions, and make judgments. Research and theory in several areas of psychology can help assess the extent to which these assumptions are correct. Second, the CJP has identified several specific problems concerning the way in which jurors in capital trials think and act. These problems involve an inability to understand instructions (especially at the sentencing phase),' a less than perfect recall of the instructions and procedures, 2 and certain biases both in thinking at the individual level and in making decisions at the group level.' Psychological research is especially attuned to identifying these types of misunderstandings, memory failures, and biases in judgment. More importantly, this research may suggest ways to mitigate or eliminate these problems. Thus, there are many aspects of the capital trial process to which the field of psychology could speak. This discussion, however, will focus on only one of these issues-responsibility in capital sentencing hearings. After considering the foregoing articles concerning the CJP, it is clear that a key factor in life versus death decisions in capital cases is the degree of responsibility taken by the various participants. Although the responsibility assumed by the judge, the lawyers, and the defendant clearly plays a role, it is the degree of personal responsibility assumed by the jurors that is most central to sentencing decisions. Two major assumptions regarding responsibility-that perceived responsibility affects decision-making, and that the greater the perceived responsibility , the less likely a juror will choose death-will serve as the basis for this discussion. Psychology theory and research clearly supports the validity of both of these assumptions.

Discussion on social capital

Abstract: At a time when economists have been accused of being imperialistic for attempting to infiltrate other social sciences, we should not be too surprised by attempts to incorporate other social sciences into economics. The Lynne paper is clearly an effort in this direction. The other two attempt to reform or broaden the mainstream neoclassical model.

Information(De-)Regulation of Capital Markets from the Viewpoint of New Institutional Economics

Abstract: Laws against insider trading, disclosure requirements, and auditing rules form the basis for information regulation of capital markets. Although the economic effects of insider dealing are mixed, institutional economics favors a prohibition of insider trading to minimize the negative effects. Private regulation of insider trading will fail because of weak disciplinary mechanisms. To prevent overregulation, however, corporations should have the right to opt out of the general ban on insider trading. The impairment of information efficiency by laws against insider trading must not automatically be countered by public disclosure and auditing rules. It is efficient to install competition among public and private disclosure and auditing standards.

Human capital development: A family objective∗

Abstract: Human capital contributes to economic development just as does physical capital or natural resources. Human capital begins developing in the family. Human capital includes nutritional levels, life expectancy, skills, knowledge, abilities and attitudes. Human capital development contributes to the individual's future economic output. The generalization ‐ “If you educate a mother you educate a family”; ‐ is given supportive evidence from an analysis by T. Paul Schultz of research on measures which contribute to human capital. Schultz (1994) shows that “subsidizing schooling for females may be justified in terms of (1) efficiency (high individual private market returns); (2) social externalities (reduced child mortality and fertility; (3) intergenerational redistribution (better health and education of children and a slower growth in population; and (4) equity (an increase in the productive capability of poorer individuals relative to richer individuals.” Thinking of human capital as an economic construct ma...

Determinants of International Capital Structure for U.S. Foreign Subsidiaries

Abstract: INTRODUCTION An important issue facing multinational enterprises (MNEs) involves establishing appropriate capital structure levels for their foreign operations. This process is extremely difficult because of cultural norms, market liquidity, exchange rate risk, capital availability, political and economic considerations, and various accounting systems which are prevalent abroad. Hodder and Senbet (1990) developed an international capital structure equilibrium characterized by differential foreign taxation and inflation settings. They found that corporate tax arbitrage played an important role in establishing an international capital structure equilibrium.(2) Although there has been plenty of research focusing on the primary determinants of capital structure, there is still disagreement regarding which factors significantly affect a firm's capital structure. An examination of the economic and finance literature shows that firm size, country location, and industry classification are often cited as having different effects on capital structure (Aggarwal and Baliga 1987; Scott and Martin 1975; Sekely and Collins 1988). As attention shifts from domestic to international analyses, empirical proof of capital structure determinants becomes more challenging. An important goal of this exploratory study is to identify some of the major determinants of capital structure among U.S. foreign subsidiaries. It attempts to estimate the relative importance of both firm-specific and environment-related factors affecting foreign subsidiaries' choices of capital structure. This study takes a unique approach to this issue by using questionnaires to collect data on the capital structure decision of foreign subsidiary managers. Several estimator models were used to identify the factors that influenced the capital structure decision of the foreign subsidiary managers. This paper on determinants of international capital structure for foreign subsidiaries contains five sections. The first section provides a brief overview of the theoretical and practical issues of international capital structure analysis. The second section focuses on the areas of data collection and questionnaire design. The third section describes the regression models that are used in our analyses. The fourth section discusses various statistics and determinants of capital structure. The final section gives the conclusions of our study. The results of this study found that age of subsidiary and financial risk were important factors in determining a foreign subsidiary's capital structure. These findings were also true when all relevant variables were considered in the logarithm form and when an alternative risk variable was considered. In addition, it was learned that total asset turnover and ownership structure were important factors in determining subsidiaries' debt ratios. LITERATURE REVIEW The issue of an optimal capital structure has been the subject of a tremendous amount of controversy as theorists debate whether or not an optimal capital structure even exists. Several important theoretical studies on capital structure have led to a plethora of research that continues to this day (Miller 1977; Modigliani and Miller 1958, 1963l Titman and Wessels 1988; Hodder and Senbet 1990). In one of the most important studies in modern corporate finance, Modigliani and Miller (1958) proposed that under certain assumptions (i.e., perfect capital markets and no income taxes), a firm's value was not affected by the proportion of debt and equity it had in its capital structure. Later, Modigliani and Miller (1963) showed that with the presence of a corporate income tax, a firm's value was maximized when its capital structure consisted totally of debt. Miller (1977) extended the analyses to include personal income taxes and argued that the value of a firm was not affected by its capital structure. Other researchers have argued that capital structure can be affected by additional factors. …