senior. Therefore, the trade-off theory offers an explanation for: (i) why young/small firms use bank debt exclusively; (ii) why large/mature firms employ mixed debt financing; and (iii) why bank debt is senior. The trade-off theory also generates predictions consistent with international evidence

The study, employing a multiple regression method, sought to examine whether the Static Trade theory had any impact on Ghanaian companies in their decisions about capital structure during the period 2001-07. Among the study findings were, that there was negative relationship between leverage

Default probability plays a central role in the static trade-off theory of capital structure. We directly test this theory by regressing the probability of default on proxies for costs and benefits of debt. Contrary to predictions of the theory, firms with higher bankruptcy costs, i.e., smaller

of Trade-Off Theory or to those of Pecking Order Theory. The empirical evidence obtained allows us to conclude that Trade-Off and Pecking Order Theories are not mutually exclusive in explaining the capital structure decisions of SMEs. The most profitable and oldest SMEs resort less to debt, which

The copyright in this thesis is owned by the author. Any quotation from the thesis or use of any of the information contained in it must acknowledge this thesis as the source of the quotation or information. ii The theoretical framework of the pecking order and trade-off theories of capital

The purpose of this study is to revisit the capital structure theory and compares the explanatory power of the Pecking Order Theory (POT) and the Static Trade-off theory (STT). Using a sample of French firms introduced on the stock exchange and belonging to SBF 250 index over a period from 1999

ABSTRACT: The empirical study was focused predominantly on validity tests of the three theories on capital structures, the static trade-off theory, the pecking order theory (information asymmetry theory), and agency cost theory in the Tanzanian context. The study used secondary data from eight

Theory and the Trade-off Theory. The article is presented in the following way: in the first part we give an overview of the research papers on the problem of capital structure in the emerging markets, the second part focuses on the methods used for testing the above mentioned theories and analyses

Turkey has experienced two economic shocks, where the second one had devastating effects on the financial sector and real sector. The purpose of this paper is to show the impact of economic crisis on the capital structure of corporations, which are traded in İstanbul Stock Exchange, and the impact

Because agency considerations have been such a prominent feature of the capital structure literature, we also introduce agency conflicts into our analysis by calculating the value of the debt that, instead of maximizing the total value of the levered firm, maximizes the utility of a risk-averse manager. This appendix describes an expanded version of the model in the main text that incorporates decisionmaking by a risk-averse manager and reports implied optimal capital structures, from the manager’s perspective, for the typical firm and for the individual firms examined in the main text. C.I. A dynamic model of capital structure choice with a risk-averse manager The model we use is based on Ju (1998, 2001). In this model, the firm issues debt with a maturity of T, which pays a continuous, constant (tax-deductible) coupon. The manager’s wealth at time zero is divided between non-firm wealth and his stake in the firm, which consists of equity shares and standard European call options on the firm’s shares, which expire at time Tu. The manager cannot sell or hedge his shares or options. For simplicity, it is assumed that the manager’s non-firm wealth grows at the risk-free rate, r, and is therefore uncorrelated with the value of the manager’s stake in the firm. The manager’s utility is given by a CRRA utility function that is defined over his entire wealth. The value process of the firm’s assets (that is, the value of the cash flows from operations) follows geometric Brownian motion. The model is in continuous time with 0 < T < T. At time zero the value of the firm’s assets is u V ( 0.) Without debt in its capital structure, the firm’s capital consists of N NL shares of stock with a total market value of E ()=