We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on present value techniques and the capital asset pricing model, while small firms are relatively likely to use the payback criterion. We find that a surprising number of firms use their firm risk rather than project risk in evaluating new investments. Firms are concerned about maintaining financial flexibility and a good credit rating when issuing debt, and earnings per share dilution and recent stock price appreciation when issuing equity. We find some support for the pecking-order and trade-off capital structure hypotheses but little evidence that executives are concerned about asset substitution, asymmetric information, transactions costs, free cash flows, or personal taxes. Key words: capital structure, cost of capital, cost of equity, capital budgeting, discount rates, project valuation, survey. 1 We thank Franklin Allen for his detailed comments on the survey instrument and the overall project. We

This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-firm matched panel data set which enables us to track the top managers across different firms over time. We find that manager fixed effects matter for a wide range of corporate decisions. A significant extent of the heterogeneity in investment, financial and organizational practices of firms can be explained by the presence of manager fixed effects. We identify specific patterns in managerial decision making that appear to indicate general differences in “style” across managers. Moreover, we show that management style is significantly related to manager fixed effects in performance and that managers with higher performance fixed effects receive higher compensation and are more likely to be found in better governed firms. In a final step, we tie back these findings to observable managerial characteristics. We find that executives from earlier birth cohorts appear on average to be more conservative; on the other hand, managers who hold an MBA degree seem to follow on average more aggressive strategies.

Prior work on leverage implicitly assumes capital availability depends solely on firm characteristics. However, market frictions that make capital structure relevant may also be associated with a firm’s source of capital. Examining this intuition, we find firms that have access to the public bond markets, as measured by having a debt rating, have significantly more leverage. Although firms with a rating are fundamen-tally different, these differences do not explain our findings. Even after controlling for firm characteristics that determine observed capital structure, and instrumenting for the possible endogeneity of having a rating, firms with access have 35 % more debt. Under the tradeoff theory of capital structure, firms determine their preferred leverage ratio by calculating the tax advantages, costs of financial distress, mispricing, and incentive effects of debt versus equity. The empirical literature has searched for evidence that firms choose their capital structure, as this theory predicts, by estimating firm leverage as a function of firm characteristics. Firms for whom the tax shields of debt are greater, the costs of financial distress lower, and the mispricing of debt relative to equity more favorable are expected to be more highly levered. When these firms discover that the net benefit of debt is positive, they will move toward their preferred capital structure by issuing additional debt and/or reducing their equity. The implicit assumption has been that a firm’s leverage is completely a function of a firm’s demand for debt. In

This paper provides a competitive equilibrium model of capital structure and industry dynamics. In the model, firms make financing, investment, entry, and exit decisions subject to idiosyncratic technology shocks. The capital structure choice reflects the tradeoff between the tax benefits of debt and the associated bankruptcy and agency costs. The interaction between financing and production decisions influences the stationary distribution of firms and their survival probabilities. The analysis demonstrates that the equilibrium output price has an important feedback effect. This effect has a number of testable implications. For example, high growth industries have relatively lower leverage and turnover rates. THE INTERACTION BETWEEN CAPITAL STRUCTURE and product market decisions has recently received considerable attention in both economics and finance. Beginning

The traditional view is that interest deductibility encourages firms to use debt financing; however, some argue that the personal tax disadvantage to interest offsets the corporate tax advantage. This paper investigates the degree to which personal taxes affect corporate financing decisions. In crosssectional regressions that control for personal taxes, debt usage is positively correlated with tax rates in each year 1980-1994, with significant coefficients in almost every year. A specification that adjusts tax benefits for the personal tax penalty statistically dominates a specification that does not. The positive (negative) effect of corporate (personal) taxes on debt usage is distinctly identified.

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Abstract. This paper examines the relationship between the levels of debt in the capital struc-ture and performance for a sample of Indian firms. Existing theory posits a positive relation-ship; however, analysis of the data reveals the relationship for Indian firms to be significant-ly negative. The structure of capital markets in India, where both short-term and long-term lending institutions are government-owned, is hypothesized to account for the finding of this relationship, and it asserted that corporate governance mechanisms which work in the West will not work in the Indian context unless the supply of loan capital is privatized. 1.

The current research seeks to examine the relationship between company size and stock return in accepted companies in Tehran stock exchange market. It is a descriptive research from methodology view, and a correlational research from studying view, an applied research in terms of goal. Time span of the research starts from 2001 to 2011. To analyze data, econometric methods and Regression Test and Advanced Regression Test,Augmented Dickey Fuller (ADF),Philips Peron, and D.W statistic, and axis Regression Test have been used. The research findings reveal that there is a relationship between the variables of company size, and stock exchange return. And the research hypotheses have been proved. Key words: company size, stock return, companies growth rate. One of the basic criteria to make decision in stock exchange is stock return. Stock return per se contains informational content, and most of the implicit and explicit investors use it for financial analyses and predictions. If a relationship is found between the independent variables of the study: company size and stock return, above mentioned factors, to the extent they relate, can be deemed as a criterion for evaluation and estimating company

The ability of managers to assimilate financial data, integrate financial and accounting data into business operations and make informed financing decisions depend largely on the level of their financial proficiency. Construction managers with no proficiency in basic financial concepts in relation to business financing decision-making process are not able to create value for their firm. The paper identified the basic financial variables that affect corporate financing decision-making and examined the level of manager's financial proficiency in context of applications and the significance in the overall corporate financing decision-making process. Criteria such as ability to interpret financial information and ability to analyse financial data were found to be the most important factors necessary. The contribution of the paper is the presentation of operations directions about the ways construction managers can create action plans to improve their financial decisions through a deeper understanding and application of the financial variables.

previous versions of the manuscript. The author also thanks the editor and reviewers of JM for their insightful and constructive comments.