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Cross-Country Determinants of Capital Structure Choice: A Survey of European Firms
Franck Bancel,Usha R. Mittoo +1 more
TL;DR: The authors survey managers in 16 European countries on the determinants of capital structure and find that firms' financing policies are influenced by both their institutional environment and their international operations, and that firms determine their optimal capital structures by trading off costs and benefits of financing.
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Abstract: We survey managers in 16 European countries on the determinants of capital structure. Financial flexibility and earnings per share dilution are primary concerns of managers in issuing debt and common stock, respectively. Managers also value hedging considerations and use "windows of opportunity" when raising capital. We find that although a country's legal environment is an important determinant of debt policy, it plays a minimal role in common stock policy. We find that firms' financing policies are influenced by both their institutional environment and their international operations. Firms determine their optimal capital structures by trading off costs and benefits of financing.
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Trade-Off and Pecking Order Theories of Debt
TL;DR: Taxes, bankruptcy costs, transactions costs, adverse selection, and agency conflicts have all been advocated as major explanations for the corporate use of debt financing as mentioned in this paper, and these ideas have often been synthesized into the trade-off theory and the pecking order theory of leverage.
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Capital structure, equity ownership and firm performance
TL;DR: In this paper, the authors investigate the relationship between capital structure, ownership structure and firm performance using a sample of French manufacturing firms and employ nonparametric data envelopment analysis (DEA) methods to empirically construct the industry's best practice frontier and measure firm efficiency as the distance from that frontier.
Capital structure around the world: The roles of firm- and country-specific determinants
TL;DR: In this article, the importance of country-specific and firm-specific factors in the leverage choice of firms from 42 countries around the world was analyzed, and it was shown that there is an indirect impact from countryspecific factors on the capital structure of firms.
Capital Structure Around the World: The Roles of Firm- and Country-Specific Determinants
TL;DR: In this article, the importance of country-specific and firm-specific factors in the leverage choice of firms from 42 countries around the world was analyzed, and it was shown that there is an indirect impact from countryspecific factors on the capital structure of firms.
753
The Value of Financial Flexibility
TL;DR: In this paper, the authors develop a model that endogenizes dynamic financing, investment, and cash retention/payout policies in order to analyze the effect of financial flexibility on firm value.
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References
•Posted Content
Law and Finance
Rafael La Porta,Rafael La Porta,Florencio Lopez de Silanes,Florencio Lopez de Silanes,Andrei Shleifer,Andrei Shleifer,Robert W. Vishny,Robert W. Vishny +7 more
TL;DR: This paper examined legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries and found that common law countries generally have the best, and French civil law countries the worst, legal protections of investors.
16.2K
Determinants of corporate borrowing
TL;DR: In this article, the authors predict that corporate borrowing is inversely related to the proportion of market value accounted for by real options and rationalize other aspects of corporate borrowing behavior, such as the practice of matching maturities of assets and debt liabilities.
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Legal Determinants of External Finance
TL;DR: The authors showed that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets than those with stronger investor protections.
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What Do We Know About Capital Structure? Some Evidence from International Data
Raghuram G. Rajan,Raghuram G. Rajan,Raghuram G. Rajan,Luigi Zingales,Luigi Zingales,Luigi Zingales +5 more
TL;DR: In this paper, the authors investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries and find that factors identified by previous studies as important in determining the cross-section of the capital structure in the U.S. affect firm leverage in other countries as well.
6.4K
The Theory of Capital Structure
Milton Harris,Artur Raviv +1 more
TL;DR: In this article, a survey of capital structure theories based on agency costs, asymmetric information, product/input market interactions, and corporate control considerations is presented, with a brief overview of the papers surveyed and their relation to each other.
4.8K