A Comprehensive Review on Capital Structure Theories

The Romanian Economic Journal, 2012, Vol XV(45):3-26, ISSN: 14544296

24 Pages Posted: 11 Jun 2012 Last revised: 29 Aug 2018

See all articles by Hamed Ahmadinia

Hamed Ahmadinia

Information Studies, Åbo Akademi University

Javad Afrasiabishani

Islamic Azad University, Tehran Central Branch - Management Faculty

Elham Hesami

Management and Economic Faculty, Industrial Management Department, Tehran Sought Branch, Islamic Azad University,Tehran, Iran

Date Written: October 1, 2012

Abstract

The aim of this article is to provide a comprehensive review on different theories and hypothesis in regard with achieving an optimal capital structure. Many researchers believed that capital structure includes share issuance, private investment, bank debt, business debts, leasing contracts, tax debt, retirement debt, deferred compensation for executives and employees, deposits, product related-debt and other probable debt. These theories and hypothesis include: Net income, Net operational income, Traditional approach theory, Miller and Modigliani theory, Static trade–off theory, Asymmetric of the information hypothesis, Pecking order theory, Signaling theory, Agency cost theory, Free cash flow hypothesis, Dynamic trade-off theory and Market Timing theory. By applying these theories, the analysts will be able to reach a maximum return with minimum risk while they increase the value of corporation. Because of the close relationship between profitability and capital structure, this paper is going to suggest a new model called genetic algorithm model by using support vector regression and profitability factors for obtaining an international range of optimal capital structure.

Keywords: profit margin, support vector regression, international optimal capital structure, leverage, genetic algorithm

JEL Classification: G11, G12, G14

Suggested Citation

Ahmadinia, Hamed and Afrasiabishani, Javad and Hesami, Elham, A Comprehensive Review on Capital Structure Theories (October 1, 2012). The Romanian Economic Journal, 2012, Vol XV(45):3-26, ISSN: 14544296. Available at SSRN: https://ssrn.com/abstract=2079997

Hamed Ahmadinia (Contact Author)

Information Studies, Åbo Akademi University ( email )

Fänriksgatan 3 B,
Henriksgatan,, Turku 20500
Finland

Javad Afrasiabishani

Islamic Azad University, Tehran Central Branch - Management Faculty ( email )

Tehran, Tehran
Iran

Elham Hesami

Management and Economic Faculty, Industrial Management Department, Tehran Sought Branch, Islamic Azad University,Tehran, Iran ( email )

Hamedan, Iran
Iran
Tehran, Isfahan 461-15655
Iran

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