- Consulting Editors
- The Oxford Handbook of Managerial Economics
- Managerial Economics: Introduction and Overview
- Managerial Economics: Present And Future
- Market Power: How Does it Arise? How is it Measured?
- Advances in Cost Frontier Analysis of the Firm
- Supply Chain Design for Managing Disruptive Risks
- Combinatorial Auctions
- Game and Information Theory in Modern Managerial Economics
- Issues in the Analysis of Time, Risk, and Uncertainty
- Behavioral Economics and Strategic Decision Making
- Advances in Pricing Strategies and Tactics
- Product Distribution and Promotion: An Analytical Marketing Perspective
- Market Imperfections and Sustainable Competitive Advantage
- The New Managerial Economics of Firm Growth: The Role of Intangible Assets and Capabilities
- Strategies for Network Industries
- Internalization Theory as the General Theory of International Strategic Management Past, Present and Future
- Competitive Strategy in the Nonprofit Sector
- Organizational Design and Firm Performance
- Design and Implementation of Pay for Performance
- Vertical Merger
- The Evolving Modern Theory of the Firm
- Financing the Business Firm
- Corporate Governance and Firm Performance
- Managing Workplace Safety and Health
- Merger Strategies And Antitrust Concerns
- On the Profitability of Corporate Environmentalism
- Name Index
- Subject Index
Abstract and Keywords
This chapter reviews the literature on the determinants of firms’ financing decisions and suggests fruitful areas for future research. We describe the tradeoff, pecking order, and market timing theories of capital structure and assess the extent to which these theories are supported by empirical evidence. Although parts of the three theories are supported by empirical evidence, the totality of the evidence does not provide compelling support for any of the three theories. Hence, to a large extent, the determinants of firms’ financing policies remain a major puzzle in financial economics.
Leonce Bargeron is an Assistant Professor of Finance in the Joseph Katz School of Business at the University of Pittsburgh.
Kenneth Lehn is the Samuel A. McCullough Professor of Finance in the Joseph Katz School of Business at the University of Pittsburgh.
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