A Review of Relevant Literature on Capital Structure and Efficient Market Hypothesis
7 Pages Posted: 23 Apr 2012
Date Written: April 22, 2012
This paper derives a literature review of the capital structure in large scale companies and the notion of efficient market hypothesis in finance. Sources of finance are one of the dominant factors which need to be assessed in financing decisions for companies. The review provides possible sources of finance for large scale companies. Cost of capital in a company can be defined as the rate of return required by the investors. In other words return expected by lenders and owners. The review further elaborates a discussion pertaining to the cost of capital as well. The Dominant theories of capital structure have also been discussed with reference to the theory proposed by Modigliani and Miller, trade-off theory and signaling theory. Finally the paper discusses the notion of efficient market hypothesis and the importance of it.
Keywords: capital structure, efficient market hypothesis
JEL Classification: G32
Suggested Citation: Suggested Citation