The Determinants of Capital Structure Choice

This paper analyzes the explanatory power of some recent theories of optimal capital structure. The study extends empirical work on capital-structure theory in three ways. First, it examines a broader set of capital-structure theories, many of which have not previously been analyzed empirically. Second, since the theories have different empirical implications in regards 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. And third, the study uses a factor-analytic technique that mitigates the measurement problems encountered when working with proxy variables. Copyright 1988 by American Finance Association.

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