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Sunday, August 2, 2020 | History

2 edition of What do we know about capital structure? found in the catalog.

What do we know about capital structure?

Raghuram Rajan

What do we know about capital structure?

some evidence from international data

by Raghuram Rajan

  • 99 Want to read
  • 26 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Subjects:
  • Capital -- Econometric models.,
  • Corporations -- Finance -- Econometric models.,
  • Financial leverage -- Econometric models.

  • Edition Notes

    StatementRaghuram G. Rajan, Luigi Zingales.
    SeriesNBER working paper series -- working paper no. 4875, Working paper series (National Bureau of Economic Research) -- working paper no. 4875.
    ContributionsZingales, Luigi., National Bureau of Economic Research.
    The Physical Object
    Pagination53 p. :
    Number of Pages53
    ID Numbers
    Open LibraryOL22421027M

      Capital structure refers to the mix of debt and equity financing a company uses to fund its operations. Capital structure ratios tend to fall within a narrow range within industries. Managers, therefore, use industry capital structure ratios as a guide for optimizing their own company's capital . Capital Structure Capital structure refers to the way in which an organization finances operations. This is generally illustrated via a balance sheet, where the overall assets are offset by the capital structure of liabilities and equity.

    capital using book value rather than market value?) Yes No. Aswath Damodaran 13 Optimum Capital Structure and Cost of Capital n If the cash flows to the firm are held constant, and the cost of capital is minimized, the value of the firm will be maximized. Aswath Damodaran 15 we . A firm's capital structure is the composition or 'structure' of its liabilities. For example, a firm that has $20 billion in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example, is referred to as the firm's g: book.

    the literature on capital structure and where possible, to relate the literature to known empirical evidence. Goal of this chapter. The goal of this chapter is to discuss the various theories that help to explain the determination of capital structure. The capital structure puzzle is unravelled and a clear.   Weighted Average Cost of Capital (WACC) is defined as the weighted average of cost of each component of capital (equity, debt, preference shares etc) where the weights used are target capital structure weights expressed in terms of market values. We will discuss the difference between book value WACC and market value weights and why market value weights are preferred over book .


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What do we know about capital structure? by Raghuram Rajan Download PDF EPUB FB2

If market values are not available, the percentages are calculated based on book values. Capital structure is also expressed by debt to total assets ratio. Percentage of equity and percentage of debt can also be calculated if we know the financial leverage ratio or debt to equity ratio of the business.

The capital structure is the particular combination of debt and equity used by a company to finance its overall operations and growth. Debt comes in the form of bond issues or loans, while equity Missing: book.

Capital structure is still a puzzle among finance scholars. Purpose of this study is to review various capital structure theories that have been proposed in the finance literature to provide. Capital structure refers to a company’s outstanding debt and equity.

It allows a firm to understand what kind of funding the company uses to finance its overall activities and growth. In other words, it shows the proportions of senior debt, subordinated debt and equity (common or preferred) in the g: book. A firm funds its operation with capital raised from varied sources.

A mix of these various sources is generally referred to as capital structure (CS). The CS has been defined as “that combination of debt and equity that attains the stated managerial goals (i.e.) the maximization of the firm’s market value”.

The debt capital in a company's capital structure refers to borrowed money that is at work in the business. The cost depends on the health of the company's balance sheet—a triple AAA rated firm can borrow at extremely low rates vs.

a speculative company with tons of debt, which may have to pay 15% or more in exchange for debt capital. In this article, we focus on analyzing the balance sheet based on a company's capital structure. A firm's judicious use of debt and equity is a key indicator of a strong balance sheet.

Kateri Zhu. Ap Tags. Capital Structure. A company’s capital structure is arguably one of its most important choices. From a technical perspective, the capital structure is defined as the careful balance between equity and debt that a business uses to finance its assets, day-to-day operations, and future growth.

Capital structure is the mix of the long-term sources of funds used by a firm. It is made up of debt and equity securities and refers to permanent financing of a firm.

It is composed of long-term debt, prefer­ence share capital and shareholders’ funds. Various. About this book Inside the risk management and corporate governance issues behind capital structure decisions Practical ways of determining capital structures have always been mysterious and riddled with risks and uncertainties.

Dynamic paradigm shifts and the. Capital Structure means a combination of all long-term sources of finance. It includes Equity Share Capital, Reserves and Surplus, Preference Share capital, Loan, Debentures and other such long-term sources of finance.

A company has to decide the proportion in which it should have its own finance and outsider’s finance particularly debt finance. Definition: Capital structure refers to an arrangement of the different components of business funds, i.e.

shareholder’s funds and borrowed funds in proper proportion. A business organization utilizes the funds for meeting the everyday expenses and. Journal of International Business Studies,3 Campello, M., ()-“ Taxes and capital structure: Do investors taxes matter.

evidence from the tax reform act ofunpublished dissertation chapter”, University of Illinois at UrbanaChampaign Chahyadi C. ()“What do we know about capital structure of privatized firm?A study. Since capital structure is the amount of debt or equity or both employed by a firm to fund its operations and finance its assets, capital structure is typically expressed as a debt-to-equity g: book.

Along the way, the book emphasizes how a sound capital structure can simultaneously reduce a firm's cost of capital and increase value to s: 2. Definition: Optimal capital structure is a financial measurement that firms use to determine the best mix of debt and equity financing to use for operations and structure seeks to lower the cost of capital so that a firm is less dependent on creditors and more able to.

The capital structure decision is one of the three most important financial decisions that management make (the distribution of earnings and the capital budgeting decisions are the other two.

Capital Expenditures Organizational Structure. Capital Structure Management. A company’s capital structure refers to the combination of its various sources of funding. Most companies are funded by a mix of debt and equity, including some short-term debt, some long-term debt, a number of shares of common stock, and perhaps shares of preferred.

Capital structure of a company refers to the mix of sources from where the long-term funds required in the business may be raised. A demand for raising funds generates a new capital structure a decision has to be made to the quantity and forms of financing.

This decision will involve an analysis of the existing capital structure and the factors Missing: book. Best books/ information on capital structure (Originally Posted: 09/12/). Hi, not sure which forum this post is best suited for but as the title suggests, I am looking for books which give a good description of how to analyse and look at capital structures of companies, and potentially how trades are based on the back of that.

Capital Structure Definition: Capital structure, as its name itself signifies, is the composition of the capital employed by the firm from various sources of comprises of both owners capital (i.e. equity capital and preferred capital) and debt capital structure of the firm represents its investment and financing g: book.

We document that the resulting effects on capital structure are very persistent. As a consequence, current capital structure is strongly related to historical market values. The results suggest the theory that capital structure is the cumulative outcome of past attempts to time the equity market.What do we know about capital structure?

Cambridge, MA: National Bureau of Economic Research, © (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Raghuram Rajan; Luigi Zingales; National Bureau of Economic Research.