How Do Cfos Make Capital Budgeting and Capital Structure Decisions?
36 Pages Posted: 9 Sep 2005
Date Written: March 8, 2002
A large body of academic research describes the optimal decisions that corporations should make, given certain assumptions and conditions. Anecdotal evidence, however, suggests that the way that corporations actually make decisions is not always consistent with the academic decision rules. In this paper, we analyze a comprehensive survey that describes the current practice of corporate finance. This allows us to identify areas where the theory and practice of corporate finance are consistent and areas where they are not.
Keywords: Capital structure, Cost of capital, Cost of equity, Capital budgeting, Discount Rates, Project valuation, Survey, Debt policy, Trade-off theory
JEL Classification: G11, G31, G12, G14
Suggested Citation: Suggested Citation