Theory of Capital Structure - a Review

ArXiv ID: ssrn-556631 “View on arXiv”

Authors: Unknown

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 theo

Keywords: Capital Structure, Pecking Order Theory, Corporate Finance, Financing Decisions, Theoretical Literature, Corporate Finance

Complexity vs Empirical Score

• Math Complexity: 7.5/10
• Empirical Rigor: 1.0/10
• Quadrant: Lab Rats
• Why: The paper presents advanced mathematical derivations, including state preference models, option pricing analogies, and multiple equations defining firm values and payoffs. However, it is purely theoretical with no backtesting, empirical data, or implementation details mentioned.

  flowchart TD
    A["Research Goal: Review of Central Capital Structure Theories"] --> B["Methodology: Systematic Literature Review"]
    B --> C["Data: Key Theoretical Models & Empirical Studies"]
    C --> D["Analysis: Comparative Synthesis of Theories"]
    D --> E{"Computational Process: Evaluate Theory Validity"}
    E --> F["Key Finding: Pecking Order Theory Dominates"]
    E --> G["Key Finding: Trade-off Theory Complements"]
    F --> H["Outcome: Unified Framework for Financing Decisions"]
    G --> H