By Anton Miglo
This e-book makes a speciality of microeconomic foundations of capital constitution conception. It combines theoretical effects with quite a few examples, routines and purposes. The booklet examines basic principles in capital constitution administration, a few of that are nonetheless no longer rather well understood within the enterprise neighborhood, comparable to Modigliani and Miller’s irrelevance consequence, trade-off conception, pecking-order conception, asset substitution, credits rationing and debt overhang. Chapters additionally conceal capital constitution concerns that experience turn into extremely important following the hot monetary predicament. Miglo discusses the ways that monetary economists have been pressured to seem severely at capital constitution, because the difficulties confronted by way of many businesses stemmed from their financing regulations following the challenge. The e-book additionally discusses hyperlinks among capital constitution and firm’s functionality, company governance, firm’s procedure and adaptability, and covers such issues as existence cycle method of capital constitution administration, capital constitution of small and start-up businesses, company financing as opposed to venture financing and examples of optimum capital constitution analyses for various businesses. This finished consultant to capital constitution idea might be of curiosity to all scholars, teachers and practitioners trying to comprehend this fast-developing and significant quarter of industrial management.
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Additional resources for Capital Structure in the Modern World
Baker & G. S. ), Capital structure and corporate ﬁnancing decisions: Theory, evidence, and practice (pp. 171–191). Wiley and Sons, Ch. 10. , & Miller, M. (1958). The cost of capital, corporation ﬁnance and the theory of investment. American Economic Review, 48(3), 261–297. , & Sousa, M. (2015). Is there still a Berlin Wall in the post-issue operating performance of European IPOs?. Available at SSRN: http://ssrn. 2347535 Ritter, J. (2014). Initial public oﬀerings: Updated statistics. , & Jaramillo F.
More recent literature (Wright 2004; Philippon and Reshev 2012; Strebulaev and Yang 2013; DeAngelo and Roll 2015) began to closely analyze historical patterns in capital structure and whether or not they can be explained by the traditional conclusions of trade-off theory, described above. For example, asset tangibility declined on average in the 20th century but at the same time the leverage ratio increased (Graham et al. 2015). The leverage increase during that period is consistent with the above predictions.
The situation is now changing. Faulkender and Smith (2014), for example, discuss tax strategies of international companies. It is mentioned that multinational groups are using significantly higher debt in high tax © The Editor(s) (if applicable) and The Author(s) 2016 A. 1 The bankruptcy cost idea points out that increasing debt in a firm’s capital structure increases its probability of bankruptcy. Since bankruptcy is a very costly process, the incentive to increase debt should depend on potential future bankruptcy costs.