Capital Structure Theory: An Overview
Capital Structure Theory: An Overview ArXiv ID: ssrn-2886251 “View on arXiv” Authors: Unknown Abstract Capital structure is still a puzzle among finance scholars. Purpose of this study is to review various capital structure theories that have been proposed in the Keywords: Capital Structure, Trade-off Theory, Pecking Order Theory, Leverage, Corporate Finance, Equity Complexity vs Empirical Score Math Complexity: 3.0/10 Empirical Rigor: 2.0/10 Quadrant: Philosophers Why: The paper is a theoretical literature review discussing established capital structure theories (MM, Trade-off, Pecking Order) with minimal advanced mathematics or empirical backtesting, focusing instead on conceptual frameworks and historical context. flowchart TD A["Research Goal: Review Capital Structure Theories<br/>'Capital Structure Theory: An Overview'"] --> B["Methodology: Literature Review"] B --> C["Key Inputs: Historical Finance Theories<br/>(Trade-off, Pecking Order, Market Timing)"] C --> D["Computational Process: Comparative Analysis<br/>& Synthesis of Findings"] D --> E["Key Outcome 1: Capital structure remains a puzzle<br/>(Context dependent, not one-size-fits-all)"] D --> F["Key Outcome 2: Trade-off & Pecking Order<br/>explain different aspects of leverage"] D --> G["Key Outcome 3: No single theory dominates;<br/>interplay of taxes, costs, & info asymmetry"]