Download this Paper Open PDF in Browser

Theory of Capital Structure - a Review

FRIHET OG MANGFOLD, FESTSSKRIFT TIL ODD, G. Arntzen. L. Fallan & O. Gustafsson, eds., Trondheim: Tapir/TØH, Tapir Academic Press, NO-7005 Trondheim, Norway

41 Pages Posted: 17 Jun 2004 Last revised: 28 Jan 2011

Stein Frydenberg

NTNU Business School - Norwegian University of Science and Technology (NTNU); Sor Trondelag University College - Trondheim Business School

Date Written: January 26, 2011

Abstract

This paper is a review of the central theoretical literature. The most important arguments for what could determine capital structure is the pecking order theory and the static trade off theory. These two theories are reviewed, but neither of them provides a complete description of the situation and why some firms prefer equity and others debt under different circumstances. The paper is ended by a summary where the option price paradigm is proposed as a comprehensible model that can augment most partial arguments. The capital structure and corporate finance literature is filled with different models, but few, if any give a complete picture.

Keywords: Theory, Capital, Structure, Review, static, trade, pecking, order

JEL Classification: G32

Suggested Citation

Frydenberg, Stein, Theory of Capital Structure - a Review (January 26, 2011). FRIHET OG MANGFOLD, FESTSSKRIFT TIL ODD, G. Arntzen. L. Fallan & O. Gustafsson, eds., Trondheim: Tapir/TØH, Tapir Academic Press, NO-7005 Trondheim, Norway. Available at SSRN: https://ssrn.com/abstract=556631

Stein Frydenberg (Contact Author)

NTNU Business School - Norwegian University of Science and Technology (NTNU) ( email )

Klaebuveien 72
Trondheim NO-7491, 7491
Norway

HOME PAGE: http://https://www.ntnu.no/ansatte/stein.frydenberg

Sor Trondelag University College - Trondheim Business School ( email )

Jonsvannsvegen 82
Postboks 2320
Trondheim, N-7004
Norway
47-73559987 (Phone)
47-73559951 (Fax)

Paper statistics

Downloads
13,429
Rank
184
Abstract Views
39,692